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Wednesday, March 20, 2013
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Deputies throw out bailout deal Disarray as MPs reject a revised proposal on levy By Stefanos Evripidou
P
ARLIAMENT last night rejected a second draft bill on the proposed levy on bank deposits in Cyprus, considered a precondition to any bailout of the troubled island. The initial deal banged out in Brussels at the weekend imposed a 6.75 per cent levy on small savers with insured deposits of under €100,000 and 9.9 per cent on those over €100,000. Following the global and local backlash to the idea of taxing insured depositers, eurozone finance ministers decided on Monday night that the finer details of the levy could be left up to Cyprus as long as the near-bankrupt member state is able to come up with a €5.8 billion ‘bail-in’ which would then trigger a €10 billion EU/IMF ‘bailout’. The surprise haircut introduced by the IMF, Germans, Finnish and Dutch in the Eurogroup meeting hit a nerve among small and big depositors, both in Cyprus and abroad, particularly Russia, given that this would be the first time a eurozone bailout requires bank depositors, not bondholders or investors, to take a hit. With an acute sense of the pervading anger among depositors, the government tabled a new draft bill before parliament yesterday, this time leaving deposits up to €20,000 exempt from the bank levy, while imposing a 6.75 per cent levy on savings between €20,000 and €100,000 and a 9.9 per cent tax on anything higher. President Nicos Anastasiades was reportedly reluctant to increase the contribution
of big depositors even if this meant forcing insured depositors with over €20,000 to contribute, fearful that any levy over 10 per cent would cause the flight of foreign capital from Cyprus, and the end of the country’s business model as a financial services centre, not to mention a potential run on banks. However, failing to increase the levy on big depositors while exempting a portion of small savers meant the new bill would create a shortfall in the €5.8 billion expected to be raised. Perhaps the foreseen deficit was a moot point for the government as Anastasiades earlier yesterday told reporters he expected parliament to reject the tax on bank deposits “because they feel and they think that it is unjust and it’s against the interests of Cyprus at large”. And he was right. A total of 36 MPs - from opposition AKEL, EDEK, the Greens, as well as coalition partners DIKO and EVROKO - all voted against the bill. Ruling DISY’s acting head Averof Neophytou requested a postponement of the vote until today, which was rejected, after which he and 18 other DISY deputies decided to abstain. Only one MP did not vote, DISY’s Stella Kyriakidou who was abroad. Ahead of the parliamentary session, between 6,000 and 7,000 people gathered outside parliament waving mostly Russian flags and chanting “Troika out of Cyprus” and “People fight, they’re sucking your blood”. During the parliamentary debate, DIKO leader Marios Garoyian said now was the time for parliament to send
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Police stand guard last night as thousands of people demonstrated outside the House of Representatives as deputies inside rejected the Eurogroup deal that included a levy on all bank deposits (AFP)
Last hope now appears to lie with Moscow By Elias Hazou AS PARLIAMENT yesterday rejected a bank levy bill, the government was working on a contingency plan, dispatching its finance minister to Russia. Finance minister Michalis Sarris flew out to Moscow some 24 hours before initially announced. The economy chief ’s mission, informed sources said, was to sell the Russians the latest idea geared at preventing the flight of billions of
euros from the island’s already hammered banks. They said the finance minister’s trip to Moscow was moved forward to give Sarris the chance of striking a deal with the Russians as it was a foregone conclusion that the Cyprus parliament would reject the bank levy as it stood yesterday. The cornerstone of Sarris’ proposal to the Russians, the same sources said, is for deposits over €100,000 to be guaranteed at 100 per cent of the cash they would lose via the bank tax.
The collateral guarantee would come in the form of bank shares backed up by future state revenues from the sale of Cyprus gas. The proposal is an improvement on a previous one, where only 50 per cent of the taxed amount was guaranteed. The guarantee was targeted at Russian investors with over €100,000, to dissuade them from pulling their money out of Cyprus – or to at least contain the phenomenon as far as
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