Cypriot parliament to debate taxing bank deposits

business March 19, 2013 00:00

By Deutsche Presse-Agentur

Nicosia - Cypriot lawmakers were set to debate on Tuesday a tax on deposits as expectation increased that the president may not be able to get enough votes to approve the one-off levy demanded by euro zone leaders.


Lawmakers in the House of Representatives were to meet at 6pm(1600 GMT) to discuss how to keep the eastern Mediterranean island nation from bankruptcy after ordering all banks to remain shut on Tuesday and Wednesday to prevent a bank run.
The bank-deposit levy has sparked public anger and upset financial markets. Protesters are scheduled to demonstrate outside parliament shortly before the debate.
A rejection of the package could see the country go bankrupt and possibly leave the euro.
Eurozone finance ministers agreed late Monday that Nicosia should be allowed to alter the tax agreed early Saturday in Brussels toprotect small savers, as long as it still raised the agreed 5.8billion euros (7.5 billion dollars).
Cypriot President Nicos Anastasiades is looking to lighten theload on depositors holding less than 100,000 euros, to get the tax passed through parliament so Cyprus can meet the requirements for its10-billion-euro bailout.
The current agreement provides for Cyprus to tax deposits above100,000 euros at 9.9 per cent and those under 100,000 at 6.75 percent.
Finance Ministry sources said that alternative plans were under discussion to shift more of the burden onto the island's wealthier bank customers, which include many Russian and British nationals.
For the first time in the euro zone crisis, European and IMF creditors have agreed with a cash-strapped EU government to force ordinary depositors to help pay as part of a bailout deal.
The move hit financial markets Monday, driving down the euro and raising fears of a loss in confidence in banks in Cyprus and elsewhere in the 17-nation euro zone.
Anastasiades has warned that if the deal is not passed, the island's financial sector would collapse, plunging Cyprus into bankruptcy. He lacks a strong majority in parliament, where the centre-right parties that support him hold only 28 of 56 seats.
The opposition socialist and communist parties have said they would reject the bailout package.