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Cyprus Central Bank chief Panicos Demetriades leaves a meeting with the president in Nicosia earlier today AP Photo/Petros Karadjias
bailout drama

Cyprus may call extra bank holiday to get time to pass unpopular bailout deal

The president needs to get the legislation ratifying the deal through parliament before banks reopen on Tuesday – or face a run on accounts.

CYPRUS HAS POSTPONED an emergency debate in parliament on a controversial EU bailout today, threatening a prolonged closure of the island’s banks as MPs baulk at an unprecedented tax on savings.

Fellow eurozone countries and international creditors imposed the deeply unpopular levy of up to 9.9 per cent on all deposits in the island’s banks as a condition for a desperately needed €10 billion bailout.

Conservative President Nicos Anastasiades needs to get the legislation ratifying the deal through parliament before banks reopen or face a run on accounts.

But Cyprus media reported that the scale of revolt against the agreement among MPs has thrown into disarray his efforts to do so over a three-day holiday weekend, and he may have to declare an additional bank holiday on Tuesday.

Negotiations are under way with the central bank to keep branches closed for an extra day, despite the potential economic cost, the privately run Sigma TV reported.

Anastasiades is struggling to secure even a simple majority for the terms of the bailout in the 56-member parliament in which his conservative DISY parliament holds just 20 seats, the channel said.

State television said the government had decided to postpone the debate to “ensure MPs were fully aware of the situation and were better informed.”

The president also postponed until Monday a planned address to the nation to defend the “painful” sacrifices which he insisted were the only way to save the island’s banking sector from total collapse.

MPs will now convene at 4:00 pm (2pm GMT) on Monday to debate ratification, the state broadcaster said.

The debt rescue package, agreed in Brussels early on Saturday after some 10 hours of talks, is significantly less than the €17 billion Cyprus had initially sought.

Most of the balance is to be made up through the bank deposit levy – the first eurozone bailout in which private depositors are having to help foot the bill.

Bank customers aren’t happy

Customers queue to use an ATM outside of a Bank of Cyprus branch on Saturday (AP Photo/Pavlos Vrionides)

Savers in Cyprus banks reacted with shock and anger after Anastasiades agreed to the tax in an 11th-hour U-turn on months of promises that it was a red line he would never cross.

“I feel betrayed,” public sector employee Elpida told AFP. “This decision might bring good results in terms of arithmetics but it will break our trust in the economy.”

Opposition politician George Lillikas called on his supporters to protest on Tuesday, charging that the president, who was elected only last month, had “betrayed the people’s vote.”

The tax will hit everyone with savings in Cyprus banks from pensioners to Russian oligarchs, and even the president of the European parliament Martin Schulz expressed concern about the hit being imposed on small depositors.

“The solution must be socially acceptable,” Schulz warned.

Britain, meanwhile, announced that it will compensate its diplomatic and military personnel for any losses from the levy – but not the tens of thousands of other British expatriates on the island.

Cypriot ministers will meet at 8:30 am on Monday to thrash out the draft legislation to put before parliament, state media said.

Europhile former president George Vassiliou pleaded with MPs to accept an agreement that he said was the only one acceptable to the parliaments of EU creditor nations like Germany.

“The Germans told us they couldn’t pass a Cyprus bailout through the Bundestag without a haircut on bank deposits,” Vassiliou told state television from Berlin.

If this bill isn’t approved, there will be a run on the banks and they will collapse.

But the socialist EDEK party said its five MPs would vote against the “catastrophic” deal and would not be strongarmed into agreeing to it because of the deadline of the banks reopening.

“We refuse to succumb to this dilemma by blackmail,” the party said.

The communist AKEL party, which has 19 seats, refused to sign an agreement on similar terms while it was in power before Anastasiades’s election last month.

And even the president’s coalition partners – centrist DIKO with eight seats – voiced strong reservations.

However German political analyst Hubert Faustmann said that ultimately MPs had little choice.

Parliament will have to vote it through because the alternative is bankruptcy. They cannot amend it, as far as I know, it is a ‘yes’ or ‘no’ vote — and a ‘no’ means bankruptcy.

- © AFP, 2013

Read: Bank deposits hit as EU/IMG bailout for Cyprus agreed >

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