Daily Archives: March 19, 2013

Archives March 19, 2013 posted by

Cyprus lawmakers reject bank tax; bailout in disarray

 

NICOSIA, March 19 (Reuters) – Cyprus’s parliament overwhelmingly rejected a proposed levy on bank deposits as a condition for a European bailout on Tuesday, throwing euro zone efforts to rescue the latest casualty of the currency area’s debt crisis into disarray.

The vote by the small state’s legislature was a stunning setback for the 17-nation euro zone, after lawmakers in Greece, Portugal, Ireland, Spain and Italy had repeatedly accepted unpopular austerity measures over the last three years to secure European aid.

The rejection, with 36 votes against, 19 abstentions and one absence, brought the east Mediterranean island, one of the smallest European states, to the brink of financial meltdown.

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Archives March 19, 2013 posted by

Parliament rejects deposit tax for bailout

 

CYPRIOT lawmakers overwhelmingly rejected a deeply unpopular tax on bank deposits on Tuesday, throwing into doubt an international bailout for the troubled euro zone member needed to avert default and a banking collapse.

The 56-seat parliament voted by 36 votes against and 19 abstentions to bury the bill, a condition of a 10 billion euro European Union bailout for the Mediterranean island. One deputy was absent.

 

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UK sends plane-load of cash to Cyprus for its troops

BRITAIN said on Tuesday it had sent one million euros in cash to Cyprus aboard a military plane for its troops on the island in case cash machines and debit cards stop working. “An RAF flight left for Cyprus this afternoon with €1m on board as a contingency measure to provide military personnel and their families with emergency loans in the event that cash machines and debit cards stop working completely,” the Ministry of Defence said in a statement.

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UPDATED: Cypriot draft bill drops levy on deposits below 20,000 euros

THE government proposed on Tuesday to spare small savers from a divisive levy on bank deposits but said it expects parliament to reject the measure, needed to secure an international bailout and avoid default and a banking collapse.

Unless parliament accepts the levy on deposits, EU countries say they will withhold a bailout, plunging one of the smallest European states closer to financial oblivion with potentially severe consequences for the rest of the troubled euro zone.

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Eurogroup throws the ball back at Cyprus

 

EUROZONE FINANCE ministers last night urged Cyprus to protect small savers’ deposits while still coming up with €5.8 billion from a deposit levy so the island’s €10 billion bailout could go ahead. 

The Eurogroup appeared to show flexibility on the details of how Cyprus should implement the unprecedented haircut on bank deposits, following the blowback caused by its decision last Saturday to take 6.75 per cent from insured depositors with under €100,000 in a Cyprus-based bank, and 9.9 per cent from deposits over that amount.  

The Cyprus deal sent shockwaves through financial markets yesterday, with shares, the euro and the bonds of southern eurozone countries sliding.

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Our View: There was so much more Anastasiades could have done

 

PRESIDENT Anastasiades had obviously underestimated the reaction there would have been to the bail-in of bank deposits to which he agreed to on Saturday morning. He did not bargain for such public anger nor could he have expected that he would have been unable to pass it through the legislature. 

Being a pragmatic and rational politician, he assumed that the political parties, presented with the dilemma between a deposit haircut and bankruptcy of the economy would opt for the former. It did not cross his mind that there would be so many politicians and economists arguing in favour of leaving the euro and allowing the struggling banks to collapse instead.

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Parliamentary vote will be a close call

 

A SIMPLE majority in the 56-member House of Representatives would be required for approval of the government bill on the deposits haircut, assuming the twice-postponed vote is held today.

However the numbers simply do not add up to a majority. Three parties AKEL (19 seats), EDEK (5) and the single-seat Greens decided on Sunday that they would vote against the haircut. This leaves President Anastasiadesrelying on his party DISY (20 seats) and his government’s coalition partner DIKO (8).  

Even if he ensures that all DISY members would back the bill the support of the eight members of DIKO that would give the government a fighting chance of passing it, is far from certain. At least three DIKO deputies had indicated they would not back the bill. 

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Banks will remain closed but ATMs stocked up

BANKS will remain closed today and tomorrow, the Central Bank announcing yesterday that “March 19 and March 20 have been declared bank holidays.”

“We could not have opened, with the bill for the deposits levy still pending,” said a senior bank executive who added that nobody knew what the levy would eventually be. The angry reaction, caused by the bail-in of small depositors had forced the government to re-consider how the haircut would be applied. 

On Sunday night the Central Bank had informed commercial banks that the levy percentages had changed. For deposits up to €100,000 the levy would be 3 per cent, between €100,000 and €500,000 10 per cent and above €500,000 12.5 per cent.

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Russia wants future involvement on Cyprus after 'dangerous' levy

A lack of coordination with Russia in future on Cyprus could affect a decision by Moscow on restructuring its €2.5 billion euro loan to the island, the Russian finance minister said yesterday.

Russian President Vladimir Putin branded as “dangerous” a weekend decision by the European Union to impose a levy on Cypriot bank accounts as part of a €10 billion bailout.

The EU agreed the move without involving Russia which has strong financial ties with the country.

Russians account for much of the billions of euros held in Cypriot banks by foreign depositors and its banks are heavily exposed to the island.

As part of a package of support for Cyprus, EU officials expect Russia to extend its existing loan by five years and refinance terms.

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Cyprus starts to lose its appeal for wealthy Russians

RUSSIANS have stashed away huge sums in Cyprus since the Soviet Union collapsed in 1991, making the most of low taxes and light regulation to keep their money safe and, in some cases, to launder it.

But Russian banks, companies and individuals will be hit hard if Cyprus imposes the one-off levy on bank deposits as part of a European Union bailout, and some started withdrawing their money even before the weekend deal was agreed.

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