Nearly 10% of savings over €100,000 could be seized underone-time levy
From: The Associated Press
Cyprus' parliament on Sunday postponed a debate and vote ona controversial levy on all bank deposits that the cash-strapped country'screditors had demanded in exchange for €10 billion ($13 billion Cdn) in rescuemoney.
The vote, which had been expected later Sunday, has beenpushed back to Monday afternoon, parliamentary official Antonis Koutalianossaid.
The announcement set off an immediate scramble among topEuropean officials, with reports that the European Central Bank was pressuringCypriot authorities to hold the vote without delay.
The stakes are high for the tiny island nation of onemillion people, because a rejection of the levy by lawmakers could push Cyprusinto bankruptcy and possibly out of the common euro currency. Officials alsofear a massive run Tuesday on Cypriot banks — after a national holiday onMonday — no matter which way the voting goes.
The state-run Cyprus News Agency said President NicosAnastasiades had personally requested the postponement, but no reason wasgiven.
The decision by Cyprus' 16 eurozone partners and theInternational Monetary Fund to impose a one-time tax of 6.75 percent on alldeposits under €100,000 and 9.9 percent over that amount has enraged Cypriotpoliticians, who have condemned it as unfair and disastrous. That brings intosharp doubt its approval in the 56-seat parliament.
It marks the first time that the IMF and the 17 eurozonenations have dipped into people's savings to finance a bailout, a move thatanalysts worry may roil international markets and jeopardize Europe's fragileeconomy.
"There are two choices, voting in favor which allowsthe country to avoid a disorderly bankruptcy, or rejection, which will have usface a disorderly bankruptcy with all that that entails," said AverofNeophytou, deputy chief of the ruling Democratic Rally party.
It's not only Cypriot depositors who will take a hit butforeign nationals as well, including many Russians who are estimated to havesome €20 billion sitting in Cypriot banks.
At their peak, Cypriot banks had assets totaling eight timesthe country's €17.5 billion economy. Those numbers have prompted accusationsfrom some European countries, primarily Germany, that Cypriot banks serve asmoney laundries for dirty Russian cash.
"It's a lose-lose situation. There will be a hugedeposit withdrawal from Cypriot banks with or without a (levy)," saidCyprus Greens lawmakers Giorgos Perdikis. "We should have the courage tomake the right decisions that will restore the public's confidence which wasdrastically shaken."
To counterbalance their cash loss, depositors will receiveCypriot bank bonds. Neophytou said there are efforts to back up those bonds —which have little value now — with Cyprus' newfound offshore gas reserves,although extraction is still several years away.
"Now the faith in Cyprus as a place where it isconvenient to keep one's money will be undermined," Anatoly Aksakov,president of the Association of Regional Banks of Russia, was quoted by theInterfax news agency as saying.
Aksakov also suggested some of the Russian money nowdeposited in Cypriot banks will move back to Russia.
Meanwhile, Britain's Treasury chief said the government willcompensate about 3,500 U.K. troops who will lose money to Cyprus's bailout tax.
British Chancellor of the Exchequer George Osborne saidSunday the government would compensate troops and civil servants. But thoseamong the 59,000 British residents of Cyprus who not working for the U.K.military or the government could still be out of pocket.