• EUROPE NEWS
• Updated March 18, 2013, 8:13 a.m. ET

Cyprus Postpones Vote on Deposit-Tax Proposal

 

By JENNY PARIS

Cyprus postponed for yet another day an emergency parliamentary session to discuss a bailout plan that will see the country's bank depositors share part of the burden, the house speaker said Monday.

The Cypriot government is negotiating with international lenders over its €10 billion bailout package which is conditional on the imposition of a one-off bank deposit levy. Matina Stevis reports on the Cypriot government's efforts to strike a deal which protects smaller depositors. Photo: Associated Press

The Cypriot parliament is now scheduled to meet Tuesday at 1600 GMT, house speaker Yannakis Omirou told reporters. The parliament had been due to meet Monday at 1400 GMT as the government sought to push the levy through parliament before banks reopened Tuesday after a three-day bank holiday. The vote delay means that the bank holiday will likely be extended for at least another day.
The Cypriot government has been in high-level talks with political leaders, central-bank officials, legislators and bank executives to win political backing for a tax on bank deposits that Cyprus agreed to impose in exchange for a bailout of €10 billion ($13.07 billion) from its euro-zone partners and the International Monetary Fund. The government is also in discussion with its creditors to ease the burden on small depositors.

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European Pressphoto Agency

A woman found this Bank of Cyprus ATM was out of order Sunday.

A failure by parliament to back the measure, or a bank run in Cyprus, could undermine confidence in the region's handling of its crisis and revive fears over the euro zone's integrity.
The postponement came as Cyprus prepares a new proposal for its prospective international lenders that will ease the pain of an extraordinary deposit tax for smaller depositors, two European officials with knowledge of the situation said Monday.
The new proposal will aim to raise €5.8 billion ($7.6 billion), the amount already set as a requirement for Cyprus's €10 billion bailout from the euro zone and the troika of lenders made up of the European Commission, the European Central Bank and the International Monetary Fund.
The new proposal will see smaller depositors, those with up to €100,000, taxed at 3%; savers with €100,000 to €500,000 taxed at 10%; and those with over €500,000 taxed at 15%, one official said.
Euro-zone finance ministers are likely to hold a teleconference to examine the new Cypriot proposal, the second official said.
"As long as the sum remains €5.8 billion, I think it will be backed by everyone, but of course the ministers and the troika will need to hear exact figures and proof that this will work," he said.
The original deal was for Cyprus to tax every depositor under €100,000 at 6.75% and those over that amount at 9.9%.