Econintersect: Not one single member of the Cypriot parliament voted for the European Commission/IMF (International Monetary Fund) to confiscate Cyprus bank deposits as part of the €16 billion bailout of the government (€6 billion) and the banks (€10 billion). The vote was 37 “no” and 19 “abstain” by the 56-member legislative body. According to the Financial Times leaders of the EU in Brussels were “stunned” by the Tuesday evening (19 March 2013) development.
Cyprus is apparently trying to get Russia to provide more aid or buy one of the major banks. Cyprus’ finance minister is currently in Moscow. This avenue does not seem likely to resolve the issue – Cyprus was unsuccessful in getting such Russian aid despite months of trying before the election of the new prime minister four weeks ago.
It is also possible that another attempt at “taxing” bank deposits might be in the works. From the Washington Post:
“We are also obviously extremely supportive of the Cypriot authorities’ intentions to introduce more progressive rates in the one-off levy,” International Monetary Fund Managing Director Christine Lagarde told a conference in Frankfurt on Tuesday.
Ultimately the ECB (European Central Bank will be in the driver’s seat. From the Financial Times:
One official involved in the talks said even if Moscow were willing to make additional loans or purchase a bank, the ECB may still withhold funding needed to keep the financial sector alive. “How can they open the banks without the ECB?” the official said, adding it would ultimately be up to eurozone leaders to decide whether Cyprus survived.
“It will become an issue of whether they tell them to take a hike or give in.”
Sources:
- Cyprus votes to reject bailout plan that would make savers pay (Michael Birnbaum, Washington Post, 19 March 2013)
- Cyprus parliament rejects bank levy (Kerin Hope and Peter Spiegel, Financial Times, 19 March 2013)
