After several delays, the parliament in Cyprus is unlikely to pass a bill taxing deposits which has prompted turmoil in its banking system, falling short on a condition for an international bailout, government spokesman Christos Stylianides said on Tuesday.
Banks will remain closed on Tuesday and probably until a parliamentary vote, to prevent a bank-run on savings by small depositors as well as large investors, mostly from Russia.
President Nicos Anastasiades briefed German Chancellor Angela Merkel and EU economics affairs commissioner Olli Rehn on Monday evening, following a Eurozone finance ministers’ teleconference where it was agreed that Cyprus should be allowed not to impose a levy on deposits of up to 100,000 euros. These accounts are supposedly guaranteed, but the Eurogroup’s money grab has caused tension in other southern European nations where savers fear their deposits will also be affected. As a result, Asian markets opened with a slump on Monday, with a snowball effect cross Europe and US markets, catching hard-line EU finance ministers off guard.
Instead, a higher levy of about 15% may be imposed on larger depositors, who will be compensated with equity linked to future natural gas earnings.
While Anastasiades said he was ready to stand by what was agreed at a euro zone finance ministers' meeting last Friday night, he "insisted that EU partners offer some additional help," Stylianides told state radio.
Parliament was due to convene at 6pm local time (1600 GMT) but unlikely to get the support of any more of the 19 deputies of the ruling Democratic Rally. Even junior coalition partner Democratic Party MPs are divided over the issue, saying more time is needed to find alternative ways to raise 5.6 bln euros to supplement the 10 bln rescue aid from the EU, ECB and IMF. No single party has a majority in the 56-member chamber.
Stylianides said Anastasiades was also likely to talk to Russian President Vladimir Putin during the day, while Finance Minister Michalis Sarris is headed to Moscow to see how to . A decision to tax bank deposits has far-reaching consequences not just for locals but for thousands of Europeans and Russians with business interests on the island.
Russia has even threatened that it might call in a 2.5 bln euro loan to Cyprus, in what is seen as a stand off with European anti-Russian officials, such as Germany’s Finance Minister Wolfgang Schauble who sees every Russian as a criminal oligarch or a money launderer.
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