Print options

March 23, 2013

Cyprus Parliament Passes Financial Measures, Future Uncertain

by Mil Arcega

After last-minute talks Friday, Cyprus lawmakers passed measures required by the European Union to secure a bank bailout. Finance ministers from the 17-nation eurozone still have to meet on Sunday to discuss the details. The country's 56-member parliament had until Monday to find ways to raise $7.5 billion or risk losing billions of dollars in emergency funding from the European Central Bank. Support from its European partners is needed to avoid a bleak financial future for Cyprus.

Banks remain closed in Cyprus. But customers still line up at ATM machines trying to withdraw cash. Many fear they could lose their savings if the banks fail. British businessman Terry Conard was lucky to withdraw the maximum - just a little more than $300.

"I am worried in terms of company money that is being transferred from overseas whether I'll ever get my hands on it, but we'll see," said Conard.

Cyprus banks are in trouble because many were heavily invested in Greek government bonds. After rejecting an unpopular plan that would have taxed all depositors, the country's lawmakers say most of the new taxes will be levied on larger deposits. Other measures include the breakup of key banks to redistribute bad assets.  

Bank director Takis Phidias believes the measures are unfair.

"I am not quite sure why the Eurogroup is willing to allow a very small population in a small island, in Cyprus, to suffer tremendously because of the wrongdoings that have taken place - mainly our voluntary participation in the rescue of the Greek nation," said Phidias.

Less than a million people live in Cyprus. But a financial disaster here could spread quickly.

Bankrate.com's Greg Mcbride spoke with VOA via Skype. "They're less than one percent of the European economy. So Cyprus themselves, very, very small. The risk with this whole Cyprus situation is if it were to spread to other markets, like a Spain or an Italy, because then, all of a sudden, that type of a contagion can have ramifications globally."

Cyprus' ruling party is optimistic the new measures will be acceptable to the European Union. Without a final deal by Monday, some economists says the country's membership in the 17-nation currency union may be in doubt.