0 Cyprus MPs in crisis session on 10 bn euros bailout

Cyprus President Nico Anastasiades was Monday seeking the backing of MPs for an EU bailout deal that slaps a levy on bank savings under harsh terms that have jolted global markets and raised fears of a new eurozone debt crisis. Ahead of the afternoon parliamentary vote on the hugely unpopular measure, negotiators were seeking to soften the blow on small-time depositors, who have been stunned by the announcement that their savings will be skimmed. 

As a condition for a desperately-needed 10-billion-euro ($13 billion) bailout for the Mediterranean holiday island, fellow eurozone countries and international creditors Saturday imposed a levy on all deposits in Cyprus banks. Deposits of more than 100,000 euros will be hit with a 9.9 percent charge, while under that threshold the levy drops to 6.75 percent. The proposal must still be passed by parliament. 

Private television channel Mega reported that negotiators were seeking to cut the rate to three percent on deposits under 100,000 euros, and raise it above 10 percent on deposits more than that amount in a way that would still see the overall sum raised remain at 5.8 billion euros. Local Sigmalive news website said a teleconference with the eurogroup could take place Monday afternoon to discuss the new proposals. 

As Cypriots voiced dismay and anger at the levy, global markets were jolted by concerns that events on the Mediterranean island could reignite the eurozone debt crisis and hit confidence in other troubled countries such as Spain and Italy. Europe's main stock markets tumbled by more than 1.0 percent in early deals as investors reacted to news of the Cyprus bailout deal. Asian equities also fell heavily in earlier trade. 

"If European policymakers were looking for a way to undermine the public trust that underpins the foundation of any banking system they could not have done a better job," said CMC Markets analyst Michael Hewson. "The feeling is that the euro crisis could be back and that you could see full-on contagion, that's why you're seeing the market reaction today," Shane Oliver, chief economist at AMP Capital in Sydney, told Dow Jones Newswires. In Asia, the euro dived, with the currency sinking in afternoon Tokyo trade to 121.77 yen, from 124.61 yen in late New York trade on Friday, and to $1.2902 from $1.3075. 

News of the controversial tax also drew a sharp response from Russian President Vladimir Putin, who called it "unfair, unprofessional and dangerous." Several analysts said the measure was meant to make sure that Brussels did not spend billions propping up the at-times ill-gotten gains of rich Russians, who are widely believed to have exploited Cyprus's reputation as a tax haven and as being soft on "dirty money". 

Cyprus has repeatedly denied the allegations and has offered to open its accounts to international inspection. Estimates vary but the Moody's rating firm estimates that up to $19 billion in private Russian cash is held in Cyprus. The figure accounts for between a third and half of all Cypriot deposits. Anastasiades, in an address to the shell-shocked nation on Sunday night, said he had chosen "the least painful option" and that rejecting the EU demands would have seen Cyprus exit the eurozone and face bankruptcy. "I fully share the unhappiness caused by a difficult and painful decision. 

That's why I continue to fight with the eurogroup to amend their decisions in the coming hours to limit the impact on small depositors," the president said. Terming it the worst crisis to hit Cyprus since the 1974 Turkish invasion, he gave an assurance that those taking a hit now would be compensated when huge gas offshore gas deposits are eventually exploited, in about 2018. "Anyone who maintains a deposit for more than two years will receive bonds linked to future state revenues from natural gas -- this will reflect half the contribution made in bank tax," he said. 

News Saturday morning of the levy shocked Cypriots at the start of a three-day holiday weekend, many rushing to cash points and depleting them within hours. Online transfers were stopped although shoppers were able to use credit cards at supermarkets and at fuel stations. Anastasiades urged all political parties to ratify the terms of the EU deal when parliament meets on Monday. Local media said he 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. 

Anastasiades needs to get the legislation ratifying the deal through parliament before banks reopen Tuesday, or face a run on accounts. But local media reported that the scale of revolt against the agreement among MPs has thrown into disarray his efforts to do so and he may have to declare an additional bank holiday on Tuesday.

AFP
source : the jakarta globe