Cyprus: Banks Remain Closed, Parliament Discusses Different Options


Cyprus: Parliament is discussing different options for a vote at 1 p.m. EST.  

 

The Cypriot parliament will vote on a European Union (EU) bailout 1 p.m. EST, March 19. Because the original plan of taxing all depositors doesn’t have a majority, legislators are looking for other options. Banks and the stock exchange remain closed throughout March 20.

Cypriot president Nikos Anastasiades said March 19: “The parliament will not approve the deal because it thinks it is unfair … I must tell you that the [EU] was not expecting this reaction,” he told reporters in Nicosia according to MarketNews.

An original plan for Cyprus to receive $13 billion in aid from the EU in order to recapitalize its banking system met with harsh opposition amongst the public and in parliament. The plan included a provision to confiscate 6.75-9.9 percent from depositors that hold funds in Cypriot banks to raise another $7.5 billion.  

This extraordinary measure is a first for the Eurozone and in fact for any developed market in recent history. Seventy-one percent of Cypriots said in instant polls they disapproved and parliament could not find a majority for a vote originally set for March 17.  Anastasiades said the government “is now making its own plans.”

In the meantime, banks and the stock exchange will remain closed through Thursday, March 20, according to reports by Cyprus Broadcasting Corporation (CBC). Since Internet banking is frozen, ATMs remain the only route for people to withdraw funds. ATMs ran out of cash shortly after the announcement of the original plan March 16, but CBC says banks have since then refilled the ATMs with cash.

According to MarketNews, the government is now discussing a plan that would nullify the tax on small depositors (up to $26,000) and increase the levy for very large deposits (12.5 percent for deposits over $650,000).   

Despite the new developments, the vote might have to be postponed again, as the junior coalition party DIKO said it was going to make demands in exchange for a yes vote. According to CBC, the party stated that “the situation is fluid and constantly changing.”

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