- Islanders want to turn for Russia for help as economic crisis deepens
- Russia has vast cash reserves in Cypriot banks
- Distrust in Germany grows over cash confiscation fears
Cyprus was on the brink of going bust last night as its teetering government faced a growing clamour to ditch the euro.
As horrified islanders faced new limits on cashpoint withdrawals and a ban on taking money out of the country, a poll showed more than two-thirds now want to leave the single currency and turn to Russia for help.
Last night, as one bank was said to have just a ‘few hours’ left before it runs out of cash, politicians were scrambling to cobble together a ‘Plan B’ to avoid a bankruptcy that would send shockwaves through the European banking system.
They insisted they will not go ahead with a plan drawn up in Brussels to confiscate up to 10 per cent of every bank deposit, branded the ‘great EU bank robbery’.
There was growing concern that Germany’s attempt to strongarm the Mediterranean island, already blamed for undermining confidence in banks across the Continent, is turning into a geopolitical blunder of historic proportions.
Even if an emergency bank restructure – which could mean big deposit holders losing almost half of their savings – goes ahead, Cyprus will need to raise billions by next week to avoid collapse.
Credit ratings agency Standard & Poor’s cut its rating on Cyprus to CCC, which means it risks defaulting on its debts.
Yesterday there were extraordinary reports that Cypriot leaders were refusing to take calls from the European Central Bank. Instead, they were locked in talks with Vladimir Putin’s government about a Russian bailout.