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Cyprus parliament meets on painful EU bailout deal

A cut-out image of Cypriot President Nicos Anastasiades decorates a DJ stand in Nicosia on March 16, 2013
A cut-out image of Cypriot President Nicos Anastasiades decorates a DJ stand as part of carnival celebrations in Nicosia on March 16, 2013. The Cyprus parliament is to hold an extraordinary session Sunday as the debt-laden government seeks to push through

The Cyprus parliament is to hold an extraordinary session Sunday as the debt-laden government seeks to push through legislation on a painful EU bailout, amid anger among bank savers who would be hard hit by the plans.

President Nicos Anastasiades is due to brief MPs at 11:30 am (0930 GMT), with a tough ride for the draft expected at a full plenum from 4:00 pm (1400 GMT), Cypriot media said.

Ministers are in a race to thrash out draft legislation ratifying the bailout and push it through parliament before banks reopen on Tuesday after a long holiday weekend, including a pre-Easter carnival Sunday marred by the news.

On Saturday evening, the president already had meetings lined up with party leaders and the island's bank bosses.

Faced with protest calls, the president said he will address the nation on Sunday to defend the controversial deal which he admitted was "painful" but insisted was the only way to save the banking sector from total collapse.

A man and a woman withdraw money from a cash-point machine in the Cypriot capital Nicosia on March 16, 2013
A man and a woman withdraw money from a cash-point machine in the Cypriot capital Nicosia on March 16, 2013.

He said thousands of small businesses would also have gone bankrupt because of cash flow problems without the deal and the unprecedented bank levy attached for an EU bailout.

Savers in Cyprus banks reacted with shock and anger after the government agreed to the levy on bank deposits in return for a desperately needed 10-billion-euro ($13 billion) bailout.

The debt rescue package, agreed with the eurozone and International Monetary Fund early on Saturday after around 10 hours of talks in Brussels, is significantly less than the 17 billion euros Cyprus had initially sought.

Most of the balance is to be made up through the bank deposit levy of up to 9.9 percent -- the first eurozone bailout in which private depositors are having to help foot the bill.

The government had held out against the bailout condition until the 11th hour, arguing it would risk a run not only on the island's own banks but also on those of other debt-ridden eurozone economies.

Cypriot President  Nicos Anastasiades arrives at the EU headquarters in Brussels, on March 15, 2013
Cypriot President Nicos Anastasiades arrives at the EU headquarters in Brussels, on March 15, 2013.

Only last Monday, Finance Minister Michalis Sarris said that a haircut on deposits in local banks would be "disastrous for Cyprus and the eurozone."

Opposition leader George Lillikas has called on his supporters to protest on Tuesday, charging that the president who was elected only last month had "betrayed the people's vote."

Even the conservative leader's partners in the ruling coalition had strong words against the deal.

"During our meeting it was stressed that the decision was... almost annihilating the Cypriot economy," said Marios Garoyian, after chairing a meeting of his centrist DIKO party.

"Various EU actors... essentially blackmailed Cyprus with a vengeance and showed ulterior motives," Garoyian said, adding he had spoken to Anastasiades about seeking "alternative choices."

The Bank of Cyprus, the island's largest lender, said it was "absolutely understandable and justified for public opinion to be concerned."

The levy will see deposits of more than 100,000 euros held by all residents of Cyprus hit with a 9.9 percent charge when lenders reopen their doors. Below that threshold, the levy drops to 6.75 percent.

At the same time, an additional "withholding tax" will be imposed on interest on bank deposits, and Cyprus will have to hike corporate tax to 12.5 percent from 10 percent and sell off state assets.

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