News / Europe

Cyprus Rejects Bailout Deal, Bank Tax

Protesters stand during parliamentary vote on a bank tax plan March 19, 2013 in NicosiaProtesters stand during parliamentary vote on a bank tax plan March 19, 2013 in Nicosia
x
Protesters stand during parliamentary vote on a bank tax plan March 19, 2013 in Nicosia
Protesters stand during parliamentary vote on a bank tax plan March 19, 2013 in Nicosia
TEXT SIZE - +
VOA News
The Cypriot parliament has overwhelmingly rejected a bailout plan demanded by international lenders that would have taxed the savings accounts of depositors at the island nation's banks.

No lawmaker voted in favor of the $13 billion rescue package Tuesday night, with 36 voting against it and 19 abstaining.

The vote left the fate of the bailout in question and raised the possibility that the Cypriot government could default on its financial obligations or even end its membership in the 17-nation euro currency union. Cyprus, a longtime offshore tax haven, had sought to use much of the bailout to refund its beleaguered banks that have been weighed down with losses from bad loans.

But the bailout terms - set by the International Monetary Fund, the European Central Bank and Cyprus' eurozone neighbors - called for the tiny country to impose what they said was a one-time tax on bank deposits, nearly 10 percent on the largest accounts above $130,000.

The proposal drew the immediate ire of Cypriots, as well as Russian President Vladimir Putin. Russian oligarchs have vast sums parked in Cypriot accounts.

Cypriot President Nicos Anastasiades, who won election last month, has predicted earlier that parliament would reject the bailout deal because it was "against the interests" of the country. Asked what alternative plan he might have, Mr. Anastasiades said, without elaborating, "We have our own plans."

One international economics expert, Andreas Hauskrecht of the Indiana University business school, told VOA he thinks Cyprus will default on its obligations if a bailout plan is not approved.

“Taxing deposits is not a very smart idea. This is where the whole mess started.  And if they don’t get the third plan, the compromise, through parliament, I actually don’t see how the Europeans can continue with the bailout without completely losing credibility. In Europe, you can’t rule out anything, but I think then a default is likely,” Hauskrecht said.

The deal with the lenders called for the tax on savings accounts to contribute $7.5 billion toward the country's bailout. Cypriot lawmakers discussed revising the tax to eliminate the tax on accounts with less than $25,000. But that plan would have fallen short of the $7.5 billion demanded by the country's lenders.

Cypriot banks are closed until Thursday to keep panicked investors from withdrawing their cash.

One Russian economist, Renaissance Capital's Ivan Tchakarov, said his country's depositors never envisioned that their savings would be taxed in Cyprus.

"There has been this kind of unwritten contract between the Russian depositors who have placed money in Cyprus and the Russian government, that it's actually safe for us to put money there, because there's a very strong relationship between Cyprus and Russia. We know that our government has extended loans to Cyprus. We never thought that such a thing might happen. So I think this contract has been violated and I think it will be more challenging for a political establishment here in Russia to deal with this issue,'' Tchakkarov said.

The Cypriot economy accounts for only a very small fraction of the eurozone's economic fortunes, but none of the previous bailouts for Greece, Portugal, Ireland and the Spanish banking system has taxed savings. Some analysts said they fear that taxing deposits in Cyprus could set a precedent that might be followed in other debt-ridden countries in the union and ignite a run on banks to withdraw money.

Hauskrecht said Europe's fear of economic calamity is the driving force for a Cyprus bailout.

"Overwhelmingly, European leaders fear that if Cyprus hits the wall we will have immediate effects on Greece, Portugal, etc. etc. And that’s the reason for the bailout package," Hauskrecht said.

You May Like

Video Pope Francis Hopes Dual Canonizations Will Reconcile Church

John the XXIII and John Paul II will be made saints in a ceremony at St. Peter’s Square on April 27 More

Thailand Reacts to Plots Targeting Israelis

Authorities hope arrest of two Lebanese suspects will disrupt plot to attack young Israeli tourists More

Video In Capturing Nature's Majesty, Film Makes Case for Its Survival

'Once Upon a Forest' takes viewers deep into heart of tropical rainforest More

This forum has been closed.
Comment Sorting
Comments
     
by: jeth from: philippines
March 20, 2013 2:38 AM
The only way that will solve this FINANCIAL CRISIS in CYPRUS is to locally implement the GLASS STEAGAL ACT.CYPRUS must not yield down to the IMF EURO and others who are asking the CYPRUS GOVERMENT to taxed its bank depositors or implement an AUSTHERITY CUTS.


by: Davis K. Thanjan from: New York
March 19, 2013 4:48 PM
Let Cyprus handle their economic problem themselves. Cyprus is a small country with less than one million people holding the euro hostage and the rest of the world concerned. Any bail out of Cyprus will destroy the economy of Euro countries. Russia is the country that should be more concerned about the economy of Cyprus with more than 30 billion euro in Cyprus. accumulated by the tax dodgers, criminals, drug trafickers, corrupt politicians and money lauderers from Russia, in additon to billions of dollars worth of deposits from Russian banks. Let Russia handle the economic problems of Cyprus.

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Pope Francis Hopes Dual Canonizations Will Reconcile Churchi
|| 0:00:00
...
 
🔇
X
Jerome Socolovsky
April 22, 2014 4:14 PM
On April 27, two popes - John the XXIII and John Paul II - will be made saints in a ceremony at St. Peter’s Square. VOA religion correspondent Jerome Socolovsky says the dual canonization is part of the current pope’s program to reconcile liberals and conservatives in the Roman Catholic Church.
Video

Video Pope Francis Hopes Dual Canonizations Will Reconcile Church

On April 27, two popes - John the XXIII and John Paul II - will be made saints in a ceremony at St. Peter’s Square. VOA religion correspondent Jerome Socolovsky says the dual canonization is part of the current pope’s program to reconcile liberals and conservatives in the Roman Catholic Church.
Video

Video In Capturing Nature's Majesty, Film Makes Case for Its Survival

French filmmaker Luc Jacquet won worldwide acclaim for his 2005 Academy Award-winning documentary "March of the Penguins". Now Jacquet is back with a new film that takes movie-goers deep into the heart of a tropical rainforest - not only to celebrate its grandeur, but to make the case for its survival. VOA's Rosanne Skirble reports.
Video

Video Boston Marathon Bittersweet for Many Runners

Monday's running of the Boston Marathon was bittersweet for many of the 36,000 participants as they finished the run that was interrupted by a double bombing last year. Many gathered along the route paid respect to the four people killed as a result of two bombings near the finish line. VOA's Carolyn Presutti returned to Boston this year to follow two runners, forever changed because of the crimes.
Video

Video Pacific Rim Trade Deal Proves Elusive

With the U.S.-led war in Iraq ended and American military involvement in Afghanistan winding down, President Barack Obama has sought to pivot the country's foreign policy focus towards Asia. One aspect of that pivot is the negotiation of a free-trade agreement among 12 Pacific Rim nations. But as Obama leaves this week on a trip to four Asian countries he has found it very difficult to complete the trade pact. VOA's Ken Bredemeier has more from Washington.
Video

Video Robotic Mission Kicks Up Lunar Dust

A robotic mission to the moon was deliberately crashed onto the lunar surface late last week, but not before scientists had collected data gathered by the spacecraft which was designed to self-destruct. VOA's Rosanne Skirble reports on the preliminary findings of the craft, called LADEE - an acronym for Lunar Atmosphere and Dust Environment Explorer.
Video

Video Boko Haram Claims Responsibility for Bombing in Nigerian Capital

The Nigerian militant group known as Boko Haram has claimed responsibility for a bombing in the capital on April 14th that killed 75 people. In the video message, Abubakar Shekau, the man who says he ordered the bombing, says nothing about the mass abduction of more than 100 teenage girls, most of whom are still missing. Heather Murdock has more for VOA from Abuja.
Video

Video Ukraine Developments Hang Over Obama Trip to Asia

President Barack Obama's trip to Asia this week comes as concerns over Beijing's territorial ambitions are growing in the region. Those concerns have been compounded by Russia's recent actions in Ukraine and the possibility that Chinese strategists might be looking to Crimea as a model for its territorial disputes with its neighbors. VOA's Bill Ide has more from Beijing.
Video

Video Autistic Adults Face Housing, Job Challenges

Many parents of children with disabilities fear for the future of their adult child. It can be difficult to find services to help adults with disabilities - physical, mental or emotional - find work or live on their own. The mother of an autistic boy set up a foundation to advocate for the estimated 1.2 million American adults with autism, a developmental disorder that causes communication difficulties and often social difficulties. VOA's Faiza Elmasry reports.
AppleAndroid