Cyprus parliament vote on bailout postponed

Sue Hall runs a wedding business in Cyprus: "Most of the money in my business deposit account belongs to couples who are to get married"

A crucial vote in Cyprus' parliament on a bailout that has sparked huge public anger has been delayed until Tuesday.

President Nicos Anastasiades has been meeting MPs in Nicosia and has indicated he wants the terms amended.

The 10bn-euro ($13bn; £8.6bn) bailout agreed with the EU and IMF had demanded that all bank customers pay a one-off levy and led to heavy cash withdrawals.

The president's party has 20 seats in the 56-member assembly and needs other parties' support to ratify the deal.

Asian and European stock markets fell amid uncertainty in Monday's trading.

Start Quote

If Cyprus' president wants to change something regarding the levy on bank deposits, that's in his hands”

End Quote Joerg Asmussen European Central Bank governing council

Meanwhile, Russian President Vladimir Putin on Monday called the proposed levy "unfair, unprofessional and dangerous", his spokesman said. Russian banks and businesses have significant deposits in Cyprus.

'People betrayed'

The debate and vote in Cyprus' parliament has now been postponed until 18:00 local time (16:00 GMT) on Tuesday. It was initially to have been held on Sunday.

President Anastasiades is at present holding talks with ministers and lawmakers at the parliament building in Nicosia, which has been cordoned off to prevent protests.

The BBC's Mark Lowen, in Nicosia, says there are suggestions Mr Anastasiades is looking at lowering the cost to those with smaller savings.

Under the currently agreed terms, depositors with less than 100,000 euros in Cyprus accounts would have to pay a one-time tax of 6.75%. Those with sums over that threshold would pay 9.9%.

Reform of how to mend broken banks, which has been negotiated globally and in Europe since the crash of 2007-8, has been based on two central principles.

First, that the savings of ordinary people should be protected, up to a high threshold - or 100,000 euros in the European Union for example.

And that financial institutions which lend to banks by buying their bonds should incur losses when banks are bailed out: bondholders should, to use the jargon, be bailed in, as part of resolution plans.

So what is seen by many as profoundly shocking about the terms of the rescue of Cyprus by the rest of the eurozone and the International Monetary Fund is that both of these principles have been broken.

Join Robert for a Twitter Q&A 16:00-1630 GMT

Our correspondent says the president may want to lower the former rate to 3%, while raising the levy on the larger depositors to 12.5%.

An EU source told Agence France-Presse there could be a three-way split on the level of levy, grouped into accounts holding less than 100,000 euros, between 100,000 and 500,000 and more than 500,000.

Joerg Asmussen, a member of the European Central Bank's governing council, said there could be a change to the deal.

He said: "It's the Cyprus government's adjustment programme. If Cyprus' president wants to change something regarding the levy on bank deposits, that's in his hands. He must just make sure that the financing is intact."

German government spokesman Steffen Seibert echoed his comments, saying: "How the country makes its contribution, how it makes the payments, is up to the Cyprus government."

Mr Anastasiades insists that without the bailout Cyprus could face bankruptcy and a possible exit from the eurozone.

He said on TV on Sunday: "I fully share the unhappiness caused by a difficult and painful decision."

He also said it was the worst crisis since Turkey invaded in 1974.


The banks are closed on Monday for a national holiday and could remain shut on Tuesday to avoid mass withdrawals.

Opposition leader George Lillikas, an independent, said the president had "betrayed the people's vote".

Russian capital

Under the bailout's current terms, depositors will be compensated with the equivalent amount in shares in their banks, and Mr Anastasiades promised that those who kept deposits in Cypriot banks for the next two years would be given bonds linked to revenues from natural gas.

Cyprus announced the discovery of a field containing between 5 and 8 trillion cubic feet of natural gas under the Mediterranean Sea in 2011 but Turkey disputes its drilling rights.

Reports have suggested that eurozone leaders, particularly in Germany, insisted on the levy because of the large amount of Russian capital kept in Cypriot banks, amid fears of money-laundering.

However, German Finance Minister Wolfgang Schaeuble said he and the International Monetary Fund had been in favour of "respecting the deposit guarantee for accounts up to 100,000" euros.

He said it was the Cypriot government, the European Commission and the European Central Bank that had decided on the levy terms and that "they now must explain this to the Cypriot people".

Highcharts graph

Russian presidential spokesman Dmitry Peskov said on Monday: "Assessing the possible decision of imposing additional tax by Cyprus on deposits, [President] Putin said that this decision, if taken, would be unfair, unprofessional and dangerous."

Unprecedented levy

  • Depositors with under 100,000 euros deposited must pay 6.75%
  • Those with more than 100,000 in their accounts must pay 9.9%
  • Depositors will be compensated with the equivalent amount in shares in their banks
  • The levy is a one-off measure

Prime Minister Dmitry Medvedev said: "It looks simply like the confiscation of other people's money."

The Moody's ratings agency estimates that, at the end of 2012, Russian banks had placed $12bn in Cypriot banks, with corporate deposits at $19bn. So Russian corporate and individual investors could lose up to $2bn.

The Russian government also gave Cyprus a 2.5bn euro loan in 2011. Russian Finance Minister Anton Siluanov told the Interfax news agency on Monday that Moscow would consider extending the loan period and restructuring the repayments.

The proposed savings levy has drawn criticism from economic analysts. Michael Hewson, of CMC Markets, told the Press Association: "If European policymakers were looking for a way to undermine the public trust that underpins the foundation of any banking system they could not have done a better job."

It is clear that negotiators of the bailout in Brussels drastically underestimated the reaction in Cyprus, says our correspondent, Mark Lowen.

Renaissance Capital's Ivan Tchakarov: "Russians are not happy about the bailout levy"

A tiny eurozone economy feels it is being blackmailed by the most powerful, and the growing resentment will do nothing to foster European solidarity, he adds.

If the levy goes ahead, it will affect many non-Cypriots with bank accounts, including UK expatriates.

However, depositors in the overseas arms of Cypriot banks will not be hit. Bank of Cyprus UK and Laiki Bank UK both confirmed on their websites that there would be no impact.

Chancellor George Osborne said the UK would compensate any government employees and military personnel whose bank accounts were affected.

More on This Story

More Europe stories


Features & Analysis

  • Mukesh SinghNo remorse

    Delhi bus rapist says victim shouldn't have fought back

  • Before and after shotsPerfect body

    Just how reliable are 'before and after' photos?

  • A cow wearing sunglasses overlaid with the phrase 'Can't touch this'Cow row

    Thousands rally against the ban on beef in India

  • Dana Lone HillDana Lone Hill

    The Native American names that break Facebook rules

Elsewhere on the BBC


  • Former al-Qaeda double agent Aimen DeanHARDtalk Watch

    Islamic State is about revenge says former al-Qaeda member turned spy Aimen Dean

Try our new site and tell us what you think. Learn more
Take me there

Copyright © 2015 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.