A report from Cyprus about the negotiations with the EU and the IMF says that the IMF is “tabling new demands every half hour”. If this is true, it means that there is no interest to keep the small island nation in the euro-zone.
In addition, French finance minister said that “Cyprus is a casino economy”. Such a statement is not helpful in resolving the situation.
After negotiations broke down on Saturday, the Cypriot president flew in a private plane to Brussels, to emergency last minute talks. The Euro-group meeting that was supposed to begin at 17:00 was postponed to 19:00 GMT. This is also a bad sign.
Update: New reports suggest that the president of Cyprus threatened to resign. According to the Cyprus mail:
“I table one proposal, you don’t accept it; I table another, same thing. What else do you want me to do? Do you want to force me to resign? If that’s what you want, let me know,”
Such news could also be interpreted as part of the pressure put on Cyprus to compromise. However, making new demands every half an hour cannot be interpreted as a negotiation tactic, but as a way to make negotiations fail.
The deal that seemed to be in the works was a levy of 20-25% on accounts over 100,000 euros in the troubled Bank of Cyprus, and a 4% of big accounts in other banks. This would spare the insured accounts of under 100K, that were supposed to be taxed under the original scheme.
Cyrpus has a bank holiday tomorrow, Monday. This is also the deadline of the ECB: without a deal, the ECB said it will cut Cyprus off liquidity. Negotiations could be extended late into Monday, but banks are scheduled to re-open on Tuesday, after being closed all of last week.
One bank has also already reduced the maximum cash withdrawal amount to 100 euros only. Electronic transfers are blocked.
If no news about an agreement is reached until the market, the euro will certainly gap lower. If a deal is reached, it will gap higher.
EUR/USD closed just under 1.30. Resistance is at 1.31 and significant support at 1.2880. For more levels, events and analysis, see the EURUSD forecast.Get the 5 most predictable currency pairs