Cyprus locked in tough talks as deadline looms

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NICOSIA, Cyprus -- Cyprus officials and international representatives were caught up in tortuous negotiations late into the night Saturday as they sought to forge a plan to raise the money the island nation needs to qualify for a bailout package. Failure would mean Cyprus could declare bankruptcy in just three days and possibly have to exit the eurozone.

It was not clear how far the two sides were getting; the information seeping out was conflicting.

Late in the evening, a finance ministry official said an accord was "very close," and would likely include a hefty tax of a fifth to a quarter of deposits over 100,000 euros at the country's troubled largest lender, Bank of Cyprus. But a banking official with knowledge of the talks said no deal was in the offing and wouldn't likely arrive before today.

Both spoke on condition of anonymity because negotiations were ongoing and they were not authorized to release details.

Meanwhile, the state-run Cyprus News Agency quoted an anonymous top official as saying an agreement was not within sight because of the "rigid stance" by the representative of the International Monetary Fund.

Cyprus has been told it must raise 5.8 billion euros ($7.5 billion) in order to secure 10 billion euros in rescue loans from other European countries that use the single currency, as well as from the IMF.

The IMF, European Central Bank and European Commission -- known as the troika -- will determine whether the plan that the Cypriots devise will meet the requirements for any international bailout package. Then, the plan is to be presented to the eurozone finance ministers for final approval.

The country's lawmakers soundly rejected an unpopular initial plan that would have seized up to 10 percent of people's bank accounts, and Cyprus is now seeking another way to raise the desperately needed money. But the idea of some sort of deposit grab returned to the fore after Cyprus' attempt to gain Russian financial aid failed.

According to a second finance ministry official, who also spoke on condition of anonymity because he's not authorized to speak about the negotiations, new laws may not be needed if negotiators opt for a "voluntary contribution" from Bank of Cyprus savings accounts above 100,000 euros, which is the insurance limit.

Another option being considered is smaller tax on all bank deposits above 100,000 euros.

The ECB has said it will stop providing emergency funding to Cyprus' banks after Monday if no new plan is in place. Without the ECB's support, Cypriot banks would collapse on Tuesday, pushing the country toward bankruptcy and a potential exit from the 17-nation bloc that uses the euro currency.

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