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Cyprus crisis: UK experts fly out to advise on bailout Cyprus crisis: UK experts fly out to advise on bailout
(about 4 hours later)
Britain has dispatched a task force of top civil servants to Cyprus to advise the stricken island on how to pull its banking system back from the brink of collapse. Britain has dispatched a taskforce of top civil servants to Cyprus to advise the stricken island on how to pull its banking system back from the brink of collapse.
The officials, led by Treasury mandarin Tom Scholar, flew out to the Mediterranean island after the government in Nicosia accepted an offer of "technical assistance" as it races to find solutions to keep its economy afloat.The officials, led by Treasury mandarin Tom Scholar, flew out to the Mediterranean island after the government in Nicosia accepted an offer of "technical assistance" as it races to find solutions to keep its economy afloat.
The highly regarded Scholar is the Treasury's second permanent secretary and an expert in public finance and international issues. At the time of the UK financial meltdown he was parachuted into Northern Rock after it was nationalised. He was also a player in the 2008 bailouts of Royal Bank of Scotland and Lloyds Banking Group. He is understood to have assembled a team of experts in banking and crisis management from across government departments to help solve the problems facing the two biggest banks, Bank of Cyprus and Laiki. The highly regarded scholar is the Treasury's second permanent secretary and an expert in public finance and international issues. At the time of the UK financial meltdown, he was parachuted into Northern Rock after it was nationalised. He was also a player in the 2008 bailouts of Royal Bank of Scotland and Lloyds Banking Group. He is understood to have assembled a team of experts in banking and crisis management from across government departments to help solve the problems facing the country's two biggest banks, Bank of Cyprus and Laiki.
The UK team arrived amid continued uncertainty about how the country can raise the €17bn (£14.5bn) it needs by Monday to prevent a collapse into bankruptcy. The UK team arrived as the parliament in Cyprus approved legislation to restructure its banking sector and create a national solidarity fund that could save the island from crashing out of the eurozone.
In a sombre statement on Cyprus television , government spokesman Christos Stylianides spelt out the gravity of the situation: "The president of the republic and the government are negotiating hard … to find solutions that would save the banking system and the wider economy and restore calm in the country. In these critical hours, everyone is obligated to show the highest responsibility. Nicosia's 56-member House endorsed the legislation after 12 hours of debate. The move is seen as central to raising €5.8bn (£5bn) that international creditors have set as a condition for a €10bn bailout.
"The parliament will be called up to make great decisions, difficult decisions … but the country must be saved. The political leadership is obligated, despite political differences, to find a solution. The next few hours will determine the future of this country." MPs agreed to impose capital controls although they stopped short of voting on a highly contentious levy on bank deposits, now expected to take place on Saturday. If it is approved, the Cypriot leader is expected to go to Brussels for talks with top officials.
The clock is ticking on Cyprus because the European Central Bank has given the country until Monday to shore up its banks before it pulls a key funding lifeline.The clock is ticking on Cyprus because the European Central Bank has given the country until Monday to shore up its banks before it pulls a key funding lifeline.
The nation's banks will have been shut for 10 days, assuming they are able to reopen on Tuesday. They closed last weekend when Nicosia announced it had accepted a bailout which included skimming €5.8bn from savings accounts. That was rejected by parliament. On Friday night, Cypriot politicians were promising a deal which would require deposits on accounts bigger than €100,000 to pay a tax of more than 10%. The nation's banks will have been shut for 10 days, assuming they are able to reopen on Tuesday. They closed last weekend when Nicosia announced it had accepted a bailout which included skimming €5.8bn from savings accounts. That was rejected by parliament.
Bills have also been placed before the Cypriot parliament to break up Laiki and allow the country Cyprus to take emergency steps to stop money flowing out of the country once the banks reopen. In light of the financial crisis, the Foreign Office warned travellers to take plenty of euros with them and to be wary of thieves.
Advice on the its website said: "While banks are closed, we advise taking sufficient euros to cover the duration of your stay, alongside appropriate security precautions against theft.