Cyprus baulks at painful EU bailout terms amid protests

The Pak Banker - - FRONT PAGE -

Cyprus post­poned an emer­gency de­bate in par­lia­ment on a con­tro­ver­sial EU bailout on Mon­day, 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 ($13 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.

The debt res­cue package, agreed with the eu­ro­zone and In­ter­na­tional Mon­e­tary Fund early on Satur­day af­ter around 10 hours of talks in Brus­sels, 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.

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

"This is like steal­ing, I feel rage," a Ni­cosia artist who gave his name only as Kyr­i­akos told me­dia. 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." Min­is­ters will now meet at 8:30am 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. "Re­duc­ing bank sav­ings is an un­just mea­sure but the econ­omy is saved and we stay in the euro. "If this bill isn't ap­proved, there will be a run on the banks and they will col­lapse. I don't think the banks will open if the bill isn't passed." But Vas­silou's cen­tre-left United Democrats has no seats in the cur­rent par­lia­ment, in which most par­ties have se­ri­ous mis­giv­ings about the deal.

The com­mu­nist AKEL party, which has 19 seats, had re­fused to sign an agree- ment on the terms on of­fer while it was in power be­fore Anas­tasi­ades's elec­tion last month.

Even the pres­i­dent's coali­tion part­ners had strong words against the deal. DIKO leader Mar­ios Garoyian said he had spo­ken to Anas­tasi­ades about seek­ing "alternative choices" amid op­po­si­tion from some of his cen­trist party's nine MPs.

But Ger­man po­lit­i­cal an­a­lyst Hu­bert Faust­mann said that ul­ti­mately MPs had lit­tle choice but to ac­cept the deal.

"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."

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