NICOSIA, Cyprus — Cyprus' parliament on Sunday postponed a debate and vote on a controversial levy on all bank deposits that the cash-strapped country's creditors had demanded in exchange for €10 billion ($13 billion) in rescue money.
The vote, which had been
expected later Sunday, has been pushed back to Monday afternoon,
parliamentary official Antonis Koutalianos said.
The announcement
set off an immediate scramble among top European officials, with reports
that the European Central Bank was pressuring Cypriot authorities to
hold the vote without delay.
The stakes are high for the tiny
island nation of one million people, because a rejection of the levy by
lawmakers could push Cyprus into bankruptcy and possibly out of the
common euro currency. Officials also fear a massive run Tuesday on
Cypriot banks — after a national holiday on Monday — no matter which way
the voting goes.
The state-run Cyprus News Agency said President
Nicos Anastasiades had personally requested the postponement, but no
reason was given.
The decision by Cyprus’ 16 eurozone partners
and the International Monetary Fund to impose a one-time tax of 6.75
percent on all deposits under €100,000 ($131,000) and 9.9 percent over
that amount has enraged Cypriot politicians, who have condemned it as
unfair and disastrous. That brings into sharp doubt its approval in the
56-seat parliament.
It marks the first time that the IMF and the
17 eurozone nations have dipped into people’s savings to finance a
bailout, a move that analysts worry may roil international markets and
jeopardize Europe’s fragile economy.
“There are two choices,
voting in favor which allows the country to avoid a disorderly
bankruptcy, or rejection, which will have us face a disorderly
bankruptcy with all that that entails,” said Averof Neophytou, deputy
chief of the ruling Democratic Rally party.
It’s not only Cypriot
depositors who will take a hit but foreign nationals as well, including
many Russians who are estimated to have some €20 billion ($26.2 billion)
sitting in Cypriot banks.
At their peak, Cypriot banks had assets
totaling eight times the country’s €17.5 billion economy. Those numbers
have prompted accusations from some European countries, primarily
Germany, that Cypriot banks serve as money laundries for dirty Russian
cash.
“It’s a lose-lose situation. There will be a huge deposit
withdrawal from Cypriot banks with or without a (levy),” said Cyprus
Greens lawmakers Giorgos Perdikis. “We should have the courage to make
the right decisions that will restore the public’s confidence which was
drastically shaken.”
To counterbalance their cash loss, depositors
will receive Cypriot bank bonds. Neophytou said there are efforts to
back up those bonds — which have little value now — with Cyprus’
newfound offshore gas reserves, although extraction is still several
years away.
“Now the faith in Cyprus as a place where it is
convenient to keep one’s money will be undermined,” Anatoly Aksakov,
president of the Association of Regional Banks of Russia, was quoted by
the Interfax news agency as saying.
Aksakov also suggested some of the Russian money now deposited in Cypriot banks will move back to Russia.
Meanwhile,
Britain’s Treasury chief said the government will compensate about
3,500 U.K. troops who will lose money to Cyprus’s bailout tax.
British
Chancellor of the Exchequer George Osborne said Sunday the government
would compensate troops and civil servants. But those among the 59,000
British residents of Cyprus who not working for the U.K. military or the
government could still be out of pocket.
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AP Writer James Heintz in Moscow contributed.
