Tags: Greece | crisis | banks | EU

Give Cyprus More Time, Greece Tells EU

Tuesday, 19 Mar 2013 04:28 PM

Banking stocks in Greece were hammered Tuesday before Cypriot lawmakers rejected a bailout plan, while government officials urged eurozone countries to give the Mediterranean island more time to come up with a viable solution.

Shares on the Athens Stock Exchange fell 3.85 percent to 923.43. Banking stocks plummeted 9.58 percent, in the first trading session since Cyprus announced its doomed plan to seize a part of bank deposits.

There were no signs of bank runs in Greece, but conservative Prime Minister Antonis Samaras called an emergency meeting with partners in the government coalition to discuss the crisis.

Moments before the Cypriot vote was announced, Socialist leader and coalition partner Evangelos Venizelos strongly indicated that Russia, a financial ally of the island, could play a key role in resolving the emergency.

"It was a major mistake to place such pressure on Cyprus," he said.

"A solution must be found with Cyprus remaining in the eurozone ... but it may involve countries outside the eurozone because of the scale of Cyprus' economy is the size that it is."

After a public holiday Monday, Greek branches of the Cypriot lenders the Bank of Cyprus, Laiki Bank and Hellenic remained closed Tuesday and Wednesday. Trading in the shares of Bank of Cyprus and Laiki were also suspended for two days on the Athens Stock Exchange.

It was unclear how the vote in Cyprus would affect plans to push through the purchase by local lenders of Cypriot bank operations in Greece. Those operations have estimated combined deposits worth 13 billion euros ($16.8 billion) and loans totaling more than 20 billion euros ($25.9 billion), with more than 300 branches and more than 4,500 staff.

A Greek treasury bill auction went ahead as planned Tuesday, raising 1.3 billion euros ($1.68 billion) in 13-week loans at an interest rate of 4.05 percent, unchanged from a Feb. 12 sale.

Greece has strong ties with Cyprus, which is majority ethnic Greek. With an economy more than 11 times larger than that of Cyprus, Greece has been surviving on rescue loans for the past three years as it struggles to make its national debt sustainable.

Public activity at Greek banks appeared normal Tuesday following repeated assurances by government officials that all deposits in the country were safe.

Greece went into recession in late 2008, with deposits falling from a high of 237 billion euros ($306.77 billion) to 150 billion euros ($194.16 billion) in June last year. Bankers fear the Cypriot turmoil could stifle a modest return of money to Greek banks of around 17 billion euros since the election.

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