Amid angry public outcry Cyprus postpones EU bailout vote

NICOSIA – Cyprus putoff till Tuesday plans of putting an EU bailout plan to vote in parliament following public outcry over its crippling terms.

Protesting Cypriots showed their palms reading “No” outside the parliament in Nicosia.

A Central Bank official said that all bank branches on the island will remain closed until at least Thursday while politicians review with lenders an unprecedented demand for every account holder on the island to pay a tax of at least 6.75 per cent on their balances as part of the rescue package.

Banks were closed Monday for a scheduled public holiday but the uncertainty over the fate of the latest eurozone rescue package sparked jitters on world markets and fury from another key Cyprus creditor, Russia.

A final decision has to be taken on the details of the levy on balances before bank branches can reopen, or else there will be a run on accounts as depositors scramble to protect their money.

Eurozone finance ministers, who along with the International Monetary Fund demanded the deeply unpopular levy in marathon negotiations that climaxed early on Saturday, were set for new talks by videoconference later on Monday to review the deal, an EU official said.

“We really want to reduce the impact” on smaller savers but the “idea is still to achieve the same objective, (of raising) 5.8 billion euros,” the official said.

President Nicos Anastasiades has been meeting MPs to discuss the terms.

The 10billion-euro ($13billion) bailout agreed with the EU and IMF demands that all bank customers pay a one-off levy.

Russian President Vladimir Putin called the proposed levy “unfair, unprofessional and dangerous”, his spokesman said. Russian banks and businesses have large deposits in Cyprus.

Eurozone leaders rejected a Cypriot request for 17 billion euros in rescue financing, insisting such a large debt would be unsustainable for the Mediterranean holiday island of less than one million people.

They offered just 10 billion euros, insisting the balance be made up from within the island, principally through the levy on bank deposits.

Hundreds of protesters gathered outside the parliament building in Nicosia, even though Monday was a public holiday, to register their anger at the unprecedented tax, not asked of other eurozone countries that have sought rescue.

“Wake up, they are sucking our blood,” demonstrators called to their fellow Cypriots.

As they delayed the emergency debate, Finance Minister Michalis Sarris and Central Bank governor Panicos Demetriades told MPs they were seeking a fresh formula that would protect people with small deposits in the island’s banks.

Parliament speaker Yiannakis Omirou said: “There are changes to the proposed government bill to be put forward, so we need more time in parliament and the finance committee to study these new proposals.”

EU officials confirmed that discussions were underway to amend the bailout package.

“If Cyprus’s president wants to change something regarding the levy on bank deposits, that’s in his hands,” European Central Bank board member Joerg Asmussen said. “He must just make sure that the financing is intact.”

Cyprus only provides for about 0.20 per cent of the total Euro-zone GDP, therefore the levy on account holders will not have a strong direct impact on the Euro-zone economy, but market is now worrying that citizens of bigger countries with financial struggles will pull cash from their bank accounts because of fears the same thing may happen to them.

The Euro declined more than 100 points against the US Dollar between the Friday close and the Monday open because of the Cyprus news, and EUR/USD dropped closer to 1.2900. Over the European session, the pair has unwound some of those losses and risen closer to the key 1.3000, where resistance may be provided.

Estimates vary but the Moody’s rating firm estimates that Russian companies and banks keep up to $31 billion in Cyprus, which accounts for between a third and half of all Cypriot deposits.

“We should say this directly: this simply looks like the confiscation of other people’s money,” Russian news agencies quoted Prime Minister Dmitry Medvedev as saying.

The Cypriot finance minister is to visit Moscow on Wednesday and the government remains hopeful of Russian help.

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