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Cyprus delays EU bailout debate as MPs baulk at terms

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. Cyprus postponed an emergency debate in parliament on a controversial EU bailout, threatening a prolonged closure o

Cyprus postponed an emergency debate in parliament on a controversial EU bailout on Sunday, threatening a prolonged closure of the island's banks as MPs baulk at an unprecedented tax on savings.

Fellow eurozone countries and international creditors imposed the deeply unpopular levy of up to 9.9 percent on all deposits in the island's banks as a condition for a desperately needed 10-billion-euro ($13 billion) bailout.

Conservative President Nicos Anastasiades needs to get the legislation ratifying the deal through parliament before banks reopen or face a run on accounts.

But Cyprus media reported that the scale of revolt against the agreement among MPs has thrown into disarray his efforts to do so over a three-day holiday weekend, and he may have to declare an additional bank holiday on Tuesday.

Negotiations are under way with the central bank to keep branches closed for an extra day, despite the potential economic cost, the privately run Sigma TV reported.

Anastasiades 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, the channel said.

State television said the government had decided to postpone the debate to "ensure MPs were fully aware of the situation and were better informed."

State media had reported that Anastasiades had also postponed until Monday a planned address to the nation but his office said it would go ahead on Sunday at around 1900 GMT.

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.

The president was to defend the "painful" sacrifices which he insisted were the only way to save the island's banking sector from total collapse.

The debt rescue package, agreed in Brussels early on Saturday after some 10 hours of talks, 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, which will hit even balances of less than 100,000 euros with a 6.75 percent deduction.

Cyprus bank customers voiced dismay that they alone of the five eurozone member countries forced to seek bailouts so far were being expected to help foot the bill.

"Many countries have economic problems more than Cyprus. Why are they doing this only in Cyprus?" lamented dentist Andreas Hadgigeorghiou.

There was also anger that the president had signed up to the levy after months of assurances that it was a red line he would never cross.

"I feel betrayed," a public sector employee who gave her name only as Elpida told AFP.

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.

Opposition politician George Lillikas called a protest for Tuesday, charging that the president, who was elected only last month, had "betrayed the people's vote."

The tax will hit everyone with money in Cyprus banks from pensioners to Russian oligarchs, and even the president of the European parliament Martin Schulz expressed concern about the hit being imposed on small depositors.

"The solution must be socially acceptable," Schulz warned.

Britain announced that it will compensate its diplomatic and military personnel for any losses from the levy -- but not the tens of thousands of other British expatriates on the island.

MPs will now convene at 4:00 pm (1400 GMT) on Monday to debate ratification, the state broadcaster said.

Europhile former president George Vassiliou pleaded with MPs to accept an agreement that he said was the only one acceptable to the parliaments of EU creditor nations like Germany.

"The Germans told us they couldn't pass a Cyprus bailout through the Bundestag without a haircut on bank deposits," Vassiliou told state television from Berlin.

"If this bill isn't approved, there will be a run on the banks and they will collapse."

But the socialist EDEK party said its five MPs would not be strongarmed into agreeing to the "catastrophic" agreement because of the threat of a prolonged bank closure until it is passed.

"We refuse to succumb to this dilemma by blackmail," the party said.

The communist AKEL party, which has 19 seats, refused to sign an agreement on similar terms when it was in power before Anastasiades's election last month.

And even the president's coalition partners -- centrist DIKO with eight seats -- voiced strong reservations.

But despite the public statements of opposition, many Cypriots said they expected MPs would eventually be forced to approve the deal.

"I am not happy, but they have to sign," said Irini Makrides, who owns a shoe shop chain.

Nicosia-based political analyst Hubert Faustmann said ultimately MPs had little choice.

"Parliament will have to vote it through because the alternative is bankruptcy. They cannot amend it, as far as I know, it is a 'yes' or 'no' vote -- and a 'no' means bankruptcy."