Cyprus yet to conclude deal with troika as talks move into early hours of Sunday

Talks in Nicosia aimed at concluding a set of measures to secure a 10-billion-euro EU-IMF bailout for Cyprus continued past midnight on Saturday without any conclusion.

Cypriot President Nicos Anastasiades met party leaders at the Presidential Palace on Saturday night following several hours of talks with troika representatives.

The officials from the European Central Bank, European Commission and International Monetary Fund also took part in the discussion with the party leaders but left the meeting shortly after midnight.

Party leaders left the Presidential Palace about an hour later.

Earlier, Finance Minister Michalis Sarris said that “substantial progress” had been made in concluding a deal with the troika and Reuters reported a senior Cypriot official saying that an agreement was within reach.

However, late on Saturday a senior Cypriot official suggested his government was not close to tying up matters with the troika.

“We are not in touching distance of an agreement,” the official, who preferred to remain anonymous, told the Cyprus News Agency.

According to the news agency, the official said that the impasse was a result of the “inflexible” stance of the International Monetary Fund representative.

“Every half hour, new demands are made,” the official said.

One of the key issues discussed between Anastasiades and the troika was a plan to raise revenues from a deposit tax as part of a range of measures aimed at reaching 5.8 billion euros.

It is thought Nicosia is proposing a 20 to 25 percent levy on savings above 100,000 euros at the Bank of Cyprus but it is not clear if the tax will be applied to pension funds as well.

A Cypriot official told Reuters late on Saturday that pension funds would be spared.

Deposits above 100,000 euros are set to be taxed at 4 percent.

This does not apply to Cyprus Popular Bank (Laiki), which is to go through a resolution process that will lead to the creation of a “good” bank and “bad” bank.

It has been reported that one of the sticking points between the troika and Nicosia is that Cyprus’s lenders want the Bank of Cyprus, the island’s largest lender, to absorb the “good” part of Laiki.

“We are here and we are working decisively to save the economy,” Anastasiades wrote in a tweet on Saturday evening. “We are making intensive efforts. We hope to have a result soon.”

Anastasiades is expected to travel to Brussels on Sunday morning ahead of a meeting of eurozone finance ministers. The Eurogroup will decide whether Cyprus has put together a robust enough package of measures to secure a bailout and liquidity for its troubled banks.

European Union Economic and Monetary Affairs Olli Rehn admitted on Saturday that Cyprus was facing a damage limitation exercise after the disastrous escalation of its economic crisis over the last few days.

“Unfortunately, the events of recent days have led to a situation where there are no longer any optimal solutions available,” said Rehn. “Today, there are only hard choices left. Support from Europe can help to minimise the economic damage and protect the most vulnerable from the effects of the financial crisis in Cyprus.”

Rehn suggested that Cyprus faces huge challenges ahead to revive its economy after the damage that has been done to its vital financial sector.

“It is clear that the near future for Cyprus will be very difficult. But Cyprus and the Cypriot people are part of the European family. The European Union stands by them and will help to rebuild the Cypriot economy,” he said.

Rehn said it was “essential” that a final agreement is reached on Sunday evening at an emergency Eurogroup meeting and then quickly implemented by all sides. Troubled Cypriot banks are due to open on Tuesday but Cypriot MPs approved on Friday the implementation of capital controls.