Cyprus turns to Russia as bailout deal flounders

The euro was in line for further turmoil last night after the Cypriot parliament rejected the troika’s bailout terms and turned to Moscow for help.

The new government was abandoned by its own members when they abstained in the vote and all others rejected the deal, which included taking a share of savings accounts to pay for a bank rescue.

There was confusion in Nicosia and among the troika as the finance minister, who came into government just three weeks ago, handed in his resignation before flying to Moscow to discuss borrowing terms with his Russian counterpart this morning.

Moscow lent Cyprus €2.5bn more than a year ago, and may be willing to lend more in exchange for shares in the massive gas field discovered in the sea off the island.

Crowds outside the parliament accused the EU of extortion and warned those inside to vote against the deal for the €10bn bailout.

They were also angry at reports that senior administration figures were tipped off in advance of the plan to haircut savings, and moved hundreds of thousands of euro out of the country.

The implications of a levy on deposit accounts were also becoming clear as the Central Bank of Cyprus said insurance firms and pension funds held €4.3bn of members’ cash in deposits at the end of January — which would be taxed at up to 10% under the troika proposal.

The president, Nikos Anastasiadis, has called a meeting of the political leaders for this morning.