By Geoffrey T. Smith
All euro-zone members want Cyprus to stay in the currency union,
but nothing can be ruled out at the present, Austrian Finance
Minister Maria Fekter said Sunday.
Arriving for an emergency meeting of euro-zone finance
ministers, Ms. Fekter told reporters that the ministers' priority
would be to avert a sovereign bankruptcy, and prevent the collapse
of the countries two largest banks.
"We hope that the two laws on bank restructuring and the capital
account limits...are both passed," she said, referring to new
legislation rushed through the Cypriot parliament at the end of
this week. "We will look at whether that will be enough and then we
will have to avert a sovereign bankruptcy on the one hand and bring
stability to the situation of the bad banks."
Ms. Fekter acknowledged that the situation was "extremely
serious" and refused to rule out any possibilities. Observers have
argued that it will be nearly impossible for Cyprus to stay in the
euro zone if it rejects aid and the European Central Bank
consequently withdraws emergency funding from Cyprus Popular Bank
(CPB.CP) and Bank of Cyprus PLC (BOCY.CP).
"At the moment, one can't rule out anything. At the moment, one
can't even see a clear direction," Ms. Fekter said. The ECB's
assistance was provided "only with a lot of reluctance and with
clear instructions to Cyprus to come to an agreement quickly," she
stressed. "The ECB won't be able to provide long-term aid to help
these banks die (sic)."
She said she was skeptical that the Cypriot government would now
agree to a revised version of a levy on depositors, after it
emphatically rejected a draft plan last week that relied heavily on
it to reduce the funding gap at the two banks.
"We want to stop (the banks) from going bankrupt and thus
creating even more damage than a levy would have done," Ms. Fekter
said.
Write to Geoffrey T. Smith at geoffrey.smith@dowjones.com