NEW YORK TIMES

After Deal Fails, Cyprus Scrambles to Find Funds

By LIZ ALDERMAN and DAVID M. HERSZENHORN

 — Cyprus’s three international lenders descended upon the presidential palace here Wednesday for discussions on whether and how a financial lifeline for the crisis-hit nation could be secured, as the country’s finance minister pressed his case in Moscow in hopes of securing further aid from Russia.

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Petros Karadjias/Associated Press

Delia Velculescu of the International Monetary Fund, right, and Isabel von Koppen Mertes of the European Central Bank, left, are shown arriving at the presidential palace in Nicosia.

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The talks come a day after the Cypriot Parliament rejected a bill to impose a tax on average depositors’ bank accounts as a condition for a bailout deal.

The government, and even the Church of Cyprus, scrambled Wednesday to come up with new ways to meet the demands of the three lenders — the European Commission, the European Central Bank and the International Monetary Fund, known as the troika — to avoid an imminent collapse of its banking sector.

A deal must be reached by Thursday, the day that a bank holiday in Cyprus is scheduled to end, according to the Cypriot central bank. In case an accord is not struck, the Finance Ministry is preparing to order banks to stay closed through at least next Tuesday.

European officials, and especially the European Central Bank, are watching the situation with alarm, said one person with direct knowledge of ongoing discussions, who was not authorized to speak publicly.

If a deal is not reached soon for a bailout that would support the banks, or if Cyprus does not find funds through some other route in the meantime, European officials fear that “the damage would be enormous, and the country itself would be at risk of collapse,” the person said.

If that happens, the person added, officials are concerned that a clear risk would arise that Cyprus could “go out of the euro,” creating “a painful situation that would spur chaos.”

The troika of lenders is insisting that Cyprus come up with €5.8 billion, or $7.5 billion, of the €10 billion bailout negotiated last weekend. The bank deposits tax, which Parliament voted down overwhelmingly Tuesday along with the bailout plan, was part of that bargain.

The finance minister of Cyprus, Michalis Sarris, met on Wednesday morning with his Russian counterpart, Anton G. Siluanov, at the Russian Finance Ministry, and in the afternoon for about 90 minutes with a deputy prime minister, Igor I. Shuvalov, at the main government offices in the Russian White House.

Emerging from the morning session, Mr. Sarris reported no progress. “We had a very good first meeting — a very constructive, very honest discussion. We underscored how difficult the situation is and we will now continue our discussions to find a solution by which we hope we will be getting some support from Russia.”

Russian officials would not immediately comment on the afternoon session but said the meetings were done for the day. Russian leaders, including President Vladimir V. Putin, had reacted furiously to the bank deposit tax, which they said had caught them by surprise.

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