Cyprus President Says Parliament Will Still Reject Bailout Plan, ‘Making Other Plans’

Cyprus President Says Parliament Will Still Reject Bailout Plan, “Making Other Plans” (ZeroHedge, March 19, 2013):

So much for the credibility of Reuters’ Greek FinMin “unnamed” source. After the newswire presented the latest Eurogroup statement as if it was one where all deposits under €100,000 will be tax exempt, which was not the case, CNA reported a little while ago that the government has submitted a revised bill according to which only deposits under €20,000 would be exempt, and everything between €20K and €100K would still see the previous 6.75% levy. The parliamentary economic committee would discuss the bill ahead of plenary a debate scheduled for 6 p.m. Cyprus time. However, now as MarketNews reports, that is likely moot.


Amusingly enough, this echoes what Russia’s former FinMin Alexei Kudrin just said, who added fuel to the fire:


Of course, as we said nearly a day ago, if there is no consensus on the term of the bail-in, it is assured that there will be no vote today either, and possibly none tomorrow, and so on, which means that with both banks and stock markets closed through Friday, Cyprus may end up in permanent stasis indefinitely.

Alternatively, parliament may just vote, reject the bailout, tipping the country into bankruptcy, forcing it to exit the Eurozone, and finally pushing Europe beyond the Rubicon. From a somewhat more credible Reuters:

Cyprus’s parliament was set to reject a divisive tax on bank deposits in a vote scheduled for Tuesday, a government spokesman said, a move that would push the island closer to a default and banking collapse.

A weekend announcement that Cyprus would break with previous practice and impose a levy on bank accounts as part of a 10 billion euro ($13 billion) EU bailout prompted some turmoil on European financial markets on Monday.

Cypriot and euro zone officials have sought to soften the initially proposed levy of 6.75 percent on depositors of up to 100,000 euros and 9.9 percent above 100,000 to ease the burden on small savers.

But passage of the bill in the 56-member chamber, where no party has a majority, was unlikely and it was not clear if the vote would even go ahead later on Tuesday if leaders were sure it would be rejected.

“It looks like it won’t pass,” Cypriot government spokesman Christos Stylianides told state radio.

The House of Representatives was expected to meet at 1600 GMT (12:00 EST) . Rejection of the measure would effectively block a bailout that Cyprus needs to keep its banks afloat and government paying wages and welfare.

Finally, just to give a taste of what would happen if things work out as hoped, the country’s Central Banker, appropriately named Panicos, said Cypriot banks stand to lose more than 10% of their deposit base within a matter of days if a levy on bank deposits is imposed.  “If the draft bill passes, we would see deposit outflows of 10 percent or maybe more in the first few days,” central bank chief Panicos Demetriades told the Cypriot parliament’s finance committee. He added that the central bank’s and the European central Bank favoured scrapping the levy for all deposits below 100,000 euros, in line with the position expressed by euro zone finance ministers late on Monday.

He is absolutely correct, except for being a little dyslexic – what he meant was 100%.

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