21 March 2013 17:09 [Source: ICIS news]
LONDON (ICIS)--European chemical company share prices slumped on Thursday as the continent awaits a resolution to the debt crisis in Cyprus.
Following the rejection of a proposal to raise €5.8bn ($7.5bn) through a levy of bank account holders in the country earlier this week, the European Central Bank (ECB) today said today it would only continue to fund the Central Bank of Cyprus until Monday.
If a solution to the funding gap has not been found by then, the ECB will withdraw all support measures.
The ECB and International Monetary Fund (IMF) had initially pledged to provide €10bn of financing for Cyprus’ banks, on the condition that the country’s government raise an additional €5.8bn. If ECB support is withdrawn, the country will be left with a €15.8bn funding gap, with a significant bond repayment tranche coming due in June this year.
In a statement issued today, the ECB said: “The Governing Council of the European Central Bank decided to maintain the current level of Emergency Liquidity Assistance (ELA) [to the Central Bank of Cyprus] until Monday, 25 March 2013.
“Thereafter, Emergency Liquidity Assistance (ELA) could only be considered if an EU/IMF programme is in place that would ensure the solvency of the concerned banks.”
The ECB's specification that a bailout scheme would need to meet with the approval of the EU and IMF may preclude any involvement by the Russian government.
A significant portion of total funds in Cypriot banks are from Russian depositors, and Cyprus is understood to have reached out to Russia with a view to securing other funding once the proposal to raise the necessary financing from accountholders fell through on Tuesday.
A bank holiday in Cyprus this week has been extended by several days to avoid a run on the banks caused by large numbers of depositors withdrawing their savings. The banks are expected to remain closed until next week.
The UK’s FTSE 100 index was down 0.69% at its closing, while Germany’s DAX index closed down 0.87%. France’s CAC 40 index closed down 1.44%. The ripples extended across the Atlantic, with the US Dow Jones Industrial Average down 0.30% in early trading.
The Dow Jones Euro Stoxx chemicals index was down by 1.81% as of 16:36 GMT, with all but one of its constituent companies marking declines in their stock prices.
Shares in Belgium-based chemicals company Solvay and France-headquartered specialty chemicals company Arkema were trading down 3.62% and 4.06% respectively compared with yesterday’s closing price.
France-based industrial gases company Air Liquide marked a 2.10% decline in its share price, while stocks in German chemicals major BASF were down 3.05%.
UK chemicals company Johnson Matthey’s share price was down 1.77% compared to yesterday’s close, and French coatings specialist AkzoNobel marked a 1.31% decline in its share price.
($1 = €0.77)
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