Cyprus weighs new bailout plan as meltdown looms

NICOSIA (AFP) - Cyprus was on Thursday fine-tuning a "Plan B" aimed at securing a eurozone bailout that the European Central Bank warned should be adopted by the weekend to avoid a banking meltdown on the debt-hit island.

As President Nicos Anastasiades huddled with political party leaders over the revised plan, Eurogroup head Jeroen Dijsselbloem warned in Brussels the crisis poses a "systemic risk" that threatens to ricochet through the eurozone.

The warning was echoed by ratings agency Fitch, which warned on Thursday that any support package for Cyprus that includes a stability levy "inevitably increases the danger of contagion risks within the eurozone."

And in Moscow, Prime Minister Dmitry Medvedev slammed the European proposals to solve the Cyprus crisis as "absolutely absurd," further raising tension between Russia and the European Union.

With financial transactions at a standstill and banks shut since Saturday not due to reopen until next Tuesday, queues formed outside cash points and retailers complained they were unable to restock because suppliers were demanding cash on delivery.

The European Central Bank abruptly warned that it could pull the plug on emergency funding for the Cypriot banking system before the banks reopen if no new bailout deal is agreed by then.

"The governing council of the European Central Bank decided to maintain the current level of Emergency Liquidity Assistance until Monday, on March 25. Thereafter, Emergency Liquidity Assistance could only be considered if an EU/IMF programme is in place that would ensure the solvency of the concerned banks," the ECB said in a short statement in Frankfurt.

Already on Wednesday, ECB executive board member Joerg Asmussen had hinted that Cyprus's banks could not count on emergency funding if Nicosia did not agree to a bailout deal, complete with a restructuring of its banking system.