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cyprus parliament
Cyprus parliament has voted to restructure the island’s banks, set up a “national solidarity fund”, and establish capital controls to prevent a bank run.
Efforts continue to reach consensus on other key issues such as levies on bank deposits.
Cypriot President Nicos Anastasiades is to hold talks in Brussels with the EU before Cyprus’s parliament reconvenes.
Cyprus needs to raise 5.8 billion euros ($7.5 billion) to qualify for a 10 billion-euro bailout.
On Friday, the Cypriot parliament passed a total of nine bills, covering three main elements of the rescue plan including:
- Restructuring of the banking sector, starting with the most troubled bank of all – Laiki (Popular) Bank, the country’s second largest
- The creation of a solidarity fund: nationalizing pension funds and other state assets
- The approval of capital controls to prevent large fund withdrawals out of Cyprus
Cyprus parliament has voted to restructure the island’s banks
The bank levy issue may come before parliament later in the weekend. A levy, possibly of around 15%, on all deposits over 100,000 euros, has been suggested.
The “solidarity fund” would allow the pooling of state assets for an emergency bond issue, reports the Reuters news agency.
These include future gas revenues and some pension funds – an idea that German Chancellor Angela Merkel has strongly condemned.
Under the bank restructuring, Cyprus’ troubled lenders will be split into so-called good and bad banks.
Before the series of much-delayed votes in an emergency session of parliament, the European Union, Germany and leading bankers all urged MPs to speedily pass the reforms.
Eurozone finance ministers have called a meeting on Sunday to discuss the Cyprus crisis.
The European Central Bank has given Cyprus until Monday to raise the bailout money, or it says it will cut off funds to the banks, meaning they would collapse, possibly pushing the country out of the eurozone.
The EU has postponed next week’s summit to discuss free trade with Japan, so European leaders can concentrate on trying to solve the Cyprus crisis.
Cyprus banks have been closed since Monday and many businesses are only taking payment in cash.
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Cyprus parliament has approved a “national solidarity fund” to ease the banking crisis, which has hit confidence across the eurozone.
MPs also imposed capital controls to prevent a run on the island’s troubled banks.
These are the first of a series of laws intended to raise the 5.8 billion euros ($7.5 billion) Cyprus needs to qualify for a 10 billion-euro bailout.
MPs are still to decide whether to impose a levy on large bank deposits.
The fund would allow the pooling of state assets for an emergency bond issue, reports the Reuters news agency.
Parliament on Tuesday rejected a levy on all deposits to raise the money.
Before the series of much-delayed votes in an emergency session of parliament, the European Union, Germany and leading bankers all urged MPs to speedily pass the reforms.
Cyprus parliament has approved a “national solidarity fund” to ease the banking crisis
The European Central Bank has given Cyprus until Monday to find a solution, or it says it will stop transferring money to its undercapitalized banks.
The EU has postponed next week’s summit to discuss free trade with Japan, so European leaders can concentrate on trying to solve the Cyprus crisis.
Banks on the island have been closed since Monday and many businesses are only taking payment in cash.
There were protests outside parliament on Friday.
Before the parliamentary session began, government spokesman Christos Stylianides said the authorities were engaged in “hard negotiations with the troika”, referring to the EU, the European Central Bank and the International Monetary Fund, the AFP news agency reports.
German Chancellor Angela Merkel warned Cyprus not to “exhaust the patience of its eurozone partners”, reports say.
Cyprus’ parliament has rejected the controversial levy on bank deposits, proposed as part of an EU-IMF 10 billion-euro ($13 billion) bailout package.
No MPs voted for the bill, with 36 voting against and 19 abstaining.
Cyprus’ finance ministry had modified the package, proposing an exemption for savers with smaller deposits, but opposition had remained fierce.
Thousands of protesters who had filled the streets outside parliament reacted with joy to the news of the vote.
EU finance ministers have warned that Cyprus’ two biggest banks will collapse if the deal does not go through in some form.
However, there has been widespread outrage on the island at the prospect of ordinary savers being forced to pay a levy of 6.75%
The plan was changed to exempt savers with less than 20,000 euros, with those over 100,000 euros charged at 9.9%, but this was not enough to placate critics.
Several MPs during the parliament debate on Tuesday evening denounced the proposed plan as “blackmail”.
President Nicos Anastasiades had urged all parties to back the bailout, saying Cyprus will be bankrupt if the deal does not go ahead.
But he also said earlier on Tuesday that MPs were likely to reject the levy, despite the modifications.
“They feel and they think it’s unjust and that it is against the interests of Cyprus at large. But I have to admit that it was something which was not expected by the troika and by our friends, the Eurogroup.”
The president has called an emergency meeting of political party leaders on Wednesday morning to discuss the way forward.
Cyprus’ parliament has rejected the controversial levy on bank deposits
The president of the Eurogroup of eurozone finance ministers, Dutch Finance Minister Jeroen Dijsselbloem, emphasized on Monday that no other eurozone country would be forced to impose such a levy.
The Cyprus central bank chief, Panicos Demetriades, has warned that scrapping the tax on small savers would scupper the plan to raise 5.8 billion euros in total from bank deposits. He also predicted account holders could suddenly withdraw 10% or more of the total in Cypriot banks if the levy was imposed.
Fearing a run on accounts, Cyprus has shut its banks until at least Thursday. The local stock exchange also remains closed.
Cyprus’ banks were badly exposed to Greece, which has itself been the recipient of two huge bailouts.
Panicos Demetriades said that he favored imposing the levy only on deposits larger than 100,000 euros, with eurozone finance ministers also suggesting such a move.
Instead, they argue that wealthier savers should pay the levy at a higher rate – losing more than 15% of their investments, correspondents say.
However, many of those larger deposits are held by Russians, and Russian leaders have already reacted angrily to the Cypriot levy – on Monday President Vladimir Putin called it “unfair, unprofessional and dangerous”.
Of the estimated 68 billion euros in total held in Cypriot bank accounts about 40% belongs to foreigners – most of them thought to be Russians.
The Cypriot government fears a higher levy on these larger deposits would prompt many large investors to withdraw from the island and would effectively destroy its financial sector.
Russia has also said it may reconsider the terms of a 2.5 billion-euro loan it made to Cyprus in 2011, which was separate from the proposed eurozone bailout.
Cypriot Finance Minister Michalis Sarris arrived in Moscow on Tuesday to see if the repayment on that loan could be delayed until 2020, and whether the interest rate could be reduced.
Officials said he would also be looking for “further investment” in his country, correspondents report, with some speculating this might mean Russian access to Cyprus’ large undeveloped gas deposits.
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Cyprus’ parliament vote on bailout deal 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 10 billion-euro ($13 billion) bailout agreed with the EU and IMF had demanded that all bank customers pay a one-off levy and led to heavy cash withdrawals.
Nicos Anastasiades’ 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.
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.
The debate and vote in Cyprus’ parliament has now been postponed until 18:00 local time on Tuesday. It was initially to have been held on Sunday.
President Nicos Anastasiades is at present holding talks with ministers and lawmakers at the parliament building in Nicosia, which has been cordoned off to prevent protests.
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%.
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.”
Nicos Anastasiades insists that without the bailout Cyprus could face bankruptcy and a possible exit from the eurozone.
The banks are closed on Monday for a national holiday and could remain shut on Tuesday to avoid mass withdrawals.
Cyprus’ parliament vote on bailout deal that has sparked huge public anger has been delayed until Tuesday
Opposition leader George Lillikas, an independent, said the president had “betrayed the people’s vote”.Under the bailout’s current terms, depositors will be compensated with the equivalent amount in shares in their banks, and Nicos 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 favor 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”.
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.”
PM 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 $12 billion in Cypriot banks, with corporate deposits at $19 billion. So Russian corporate and individual investors could lose up to $2 billion.
The Russian government also gave Cyprus a 2.5 billion 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.
A tiny eurozone economy feels it is being blackmailed by the most powerful, and the growing resentment will do nothing to foster European solidarity.
If the levy goes ahead, it will affect many non-Cypriots with bank accounts.
However, depositors in the overseas arms of Cypriot banks will not be hit.
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