Cyprus President Nicos Anastasiades will try to persuade lawmakers to back a plan to impose losses on the island nation’s depositors today as part of a 10 billion-euro ($13 billion) bailout aimed at preventing a financial collapse and a possible departure from the euro area.
Anastasiades will defend his decision to accept a rescue that includes the euro area’s first move to penalize depositors before the parliament session on the legislation begins at 4 p.m. in Nicosia. In a televised address to the nation last night, Anastasiades said he would push in the hours before the vote to try to soften the impact of the measure on depositors.
“My decision, to have the hoped-for results, needs the approval of parliament,” Anastasiades said. “I appeal to the parliamentary parties that their decision, one I shall fully respect, is one guided by what is in the best interests of citizens and the homeland.”
Anastasiades, 66, has reversed himself on his pledge not to accept losses for depositors as he was elected the country’s leader on Feb. 24 on a promise to revive stalled bailout talks. Euro-area finance ministers meeting in Brussels on March 15 and March 16 agreed to tax Cyprus bank deposits.
The yield on Cyprus’s 1.415 billion euros of 3.75 percent 2013 bonds scheduled for repayment on June 3 almost doubled to 63 percent from 35 percent. The Euro Stoxx 50 Index fell 1.4 percent and the euro was trading at $1.2966, down 0.9 percent at 11:43 a.m. in Athens today.
The measure, which is aimed at raising 5.8 billion euros, means a smaller bailout for the east Mediterranean island nation than the 17.5 billion euros envisaged at one point. Under the plan, Cyprus will impose a levy of 6.75 percent on deposits of less than 100,000 euros and 9.9 percent for 100,000 euros or more.
The vote comes a day after originally planned as Anastasiades fended off fury from Cypriot voters and fought to secure the majority he needs.
With Anastasiades’s Disy party holding 20 seats in the 56-seat legislature, he needs at least nine more votes to secure approval. The communist Akel party, which controls 19 seats, and the Edek party, with five seats, have both said they will vote against the bill.
Cypriots woke up on March 16 to find bank transfers frozen as the country’s authorities prepared to remove the tax from accounts before banks are due to reopen tomorrow. Today is a bank holiday in Cyprus. The bank holiday may be extended by at least one day, state-run broadcaster CYBC reported, without saying how it got the information.
Anastasiades said that savers keeping their deposits in Cyprus for two years would receive securities linked to future revenue from the country’s natural gas reserves. He also said that he would push in the hours left before the parliamentary vote for European officials to accept changes to soften the impact for most depositors.
The changes included taxing deposits less than 100,000 euros at a 3 percent rate, while setting the levy at 10 percent between 100,000 euros and 500,000 euros and at 12 percent for deposits greater than that, Antenna TV reported, without saying how it got the information.
European officials have struggled to find an agreement that would rescue Cyprus, which accounts for less than half of a percent of the euro region’s economy, without unsettling investors in larger countries. Other elements of the rescue include asset sales and an increase in the corporate tax rate to 12.5 percent from 10 percent.
Seventy-one percent of Cypriots said parliament should reject the law, according to a poll by Insight Market Research reported in Greece’s state-run Athens News Agency. The poll showed 73 percent of the 600 respondents polled yesterday believed Anastasiades failed to secure the best bailout for the country and that 72 percent thought those with less than 100,000 euros of deposited savings should be exempt from the levy.
Cyprus in June became the fifth euro-area nation to request a rescue, after Greece’s debt restructuring, the largest in history, trashed the financial health of lenders including Bank of Cyprus Plc and Cyprus Popular Bank Pcl, the nation’s two biggest.