* European shares pare losses suffered on Cyprus crisis
* Heading for worst week since November
* German govt bond yields edge off 2013 lows
* Euro up to $1.295, gold hovers near 1-month high
By Marc Jones
LONDON, March 22 (Reuters) - World shares were heading for
their worst week since November and gold was nearly at a
one-month high on Friday as Cyprus scrambled to avoid a meltdown
of its banks and exit from the euro that could upset the whole
The European Union has given Cyprus until Monday to raise
5.8 billion euros to secure a 10-billion euro international
bailout. Parliament already rejected one deal.
A few signs of progress ahead of what was expected to be a
difficult weekend of negotiations on the island helped European
shares pare back early losses but uncertainty remained.
Cypriot Finance Minister Michael Sarris flew home from
Moscow empty-handed after failing to win support in two days of
crisis talks with Russia on a possible new financing package.
Many Russians hold savings in Cypriot banks.
Cyprus's partners in the 17-nation euro zone have little
patience as lawmakers prepared to debate plans to bundle state
assets in what has been likened to "a national fire sale".
Europe's stock markets have borne the brunt of this week's
worries and the pan-European FTSEurofirst 300 was flat
as midday approached in London, leaving it on course for its
worst week since mid-November.
It had been deep in the red before a rebound following news
Cyprus had resurrected a deal to spin off the Greek operations
of its battered banks.
But it was not enough to fully turn market sentiment. Asian
shares had ended the week at 2013 lows and minor gains on
Germany's DAX and France's CAC, left the MSCI
world share index down 0.2 percent.
Data from Germany also weighed on the market mood after a
survey from the Ifo institute showed business morale in the euro
zone's biggest economy fell for the first time in five months.
Germany's economic resilience remains the bloc's best hope
of pulling out of recession but David Brown of New View
Economics said the Ifo survey suggested "the bells are starting
to toll in Germany that the euro zone crisis is about to hit
recovery prospects again".
As the Cyprus worries underpinned demand for safe-haven
assets, gold was near a 3-1/2-week high of $1,612.96 an
ounce and on track for its biggest weekly rise in four months.
German government bonds were also strong. The yield on
10-year Bunds fell to its lowest level of the year
in early trading and traders expected further falls if the
crisis on the Mediterranean island of 1.1 million remains
Having rejected a proposed levy on bank deposits in exchange
for the EU bailout earlier in the week, Nicosia had turned to
the Kremlin hoping the billions of euros wealthy Russians have
in its now crippled banks would squeeze Moscow to provide help.
But with those hopes dashed, the focus was back on what
could be done before the ECB pulls the plug on Monday on the
emergency funding that is keeping the Cypriot banks afloat.
A Cypriot government spokesman said "the next few hours"
would "determine the future of the country".
Although deal with the EU was possible over the weekend,
Alessandro Giansanti, a rate strategist at ING, said investors
were still moving funds into "core" European bonds like Bunds:
"We still have the risk that the situation can get out of
control especially in terms of the banking sector," he said.
"That's why we have pressure for lower core yields."
U.S. stock futures pointed to a steady open on Wall Street
while the dollar slipped slightly against a basket of major
In contrast to this week's tumble in stocks, the euro and
the bonds of Italy and Spain, the two countries which remain the
largest concern for euro zone watchers, have held firm.
Although Cyprus's plan to reduce its debts by seizing up to
10 percent of savings has added a new dimension to the crisis,
investors appear reassured by the promise by ECB head Mario
Draghi to do whatever needed to ensure the euro's survival.
The currency had been firm all morning and rose to a session
high of $1.2945 versus the dollar and recovered from a
two-week low against the yen after news of the agreement with
Greece to spin off Greek units of Cypriot banks.
Spain enjoyed a strong debt sale on Thursday and its 10-year
bond yields, along with those of Italy and Portugal, continued
to fall on Friday, although a Cypriot government bond due to pay
out in June saw its yield spike to a staggering 131 percent.
Key commodities such as oil and copper prices have also been
hit by Cyprus' troubles, which have rekindled worries the euro
zone crisis could damage the still-fragile global recovery.
Brent oil was holding above $107 a barrel at 1115 GMT but
was set for a second week in the red, having dropped 2 percent
drop since Monday.
Carsten Fritsch, an analyst at Commerzbank, listed rising
North Sea supply and the resumption of exports from South Sudan
as two additional reasons for the weakness.
"The latter might be attributable to Cyprus to some extent,"
Fritsch added. "But all this Cyprus fear is overdone."