The European Central Bank said it may cut Cypriot banks off fromemergency funds after March 25 as the island nation's president,Nicos Anastasiades, scrambled to forge agreement on a plan to staveoff financial collapse.

The ECB's Governing Council said today that so-called emergencyliquidity assistance, or ELA, “could only be considered” afterMonday if an aid program from the euro area and InternationalMonetary Fund “that would ensure the solvency of the concernedbanks” is in place, the central bank said today in a statement.

The Cypriot government may propose a revamped bank-deposit levyto raise 5.8 billion euros ($7.5 billion), after lawmakers rejecteda previous measure, a Cypriot official said. In Moscow, FinanceMinister Michael Sarris pressed Russia for aid, offering“opportunities” including banking and natural-gas assets inreturn.

Euro-area finance ministers on March 16 agreed to anunprecedented tax on Cypriot bank deposits as officials unveiled a10 billion-euro rescue plan for the country. The government amendedan initial proposal to exempt deposits of up to 20,000 euros, butfailed to win support in parliament as popular dissent mounted.

Cyprus in June became the fifth euro-area nation to request arescue after Greece's debt restructuring, the largest in history,trashed the financial health of lenders including Bank of CyprusPlc and Cyprus Popular Bank Pcl, the nation's two biggest.

Dutch Finance Minister Jeroen Dijsselbloem, who leads meetingsof euro-area finance chiefs, told European Union lawmakers inBrussels today that it's up to Cyprus to come forward with a newproposal for raising revenue to trigger emergency loans. TheEurogroup has insisted that Cyprus meet its 5.8 billion-eurorevenue target, while allowing flexibility on how the levy isstructured.

Cyprus central bank chief Panicos Demetriades said in commentsbroadcast on state-run CYBC television today that he expects abailout program to be agreed by the ECB deadline.

Anastasiades met with political party leaders this morning. Ifthey reach an agreement, a new bill could be submitted toParliament today, CYBC reported, without saying how it got theinformation.

'Durable and Fair'

The plan could include the creation of an investment fundcapable of issuing bonds linked to future gas revenue, the AthensNews Agency reported, without saying how it got theinformation.

“The government of Cyprus needs to decide what it wants,” FrenchFinance Minister Pierre Moscovici said today on RMC radio. “Itneeds to make a choice both for Europe and for its people to find asolution that is durable and fair.”

The Cypriot central bank has ordered lenders to remain closedthrough tomorrow. With a national holiday on March 25,account-holders therefore won't have access to their money beforeTuesday.

In Moscow, Sarris said Cyprus is “asking for help clearly, butsomething that would make also economic sense for Russia.” Cyprusseeks the extension of 2.5 billion-euro loan granted by Russia inDecember 2011, and a fresh loan of 5 billion euros, Vedomostireported, without citing anyone.

European officials have struggled to find an agreement thatwould rescue Cyprus, which accounts for less than half of a percentof the euro region's economy, without unsettling investors inlarger countries. Other elements of the rescue include asset salesand an increase in the corporate tax rate to 12.5 percent from 10percent.

The proposed EU bailout of Cyprus is “absurd” and “surprising inits unpredictability and lack of consistency,” Russian PrimeMinister Dmitry Medvedev said at a conference today in Moscow.

Bloomberg News

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