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
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

China May Be Biggest Winner From Ukraine Crisis

Missile sales, oil and gas shipments are among many areas that may drive Beijing and Moscow closer together in coming years More

Obama Faces Chaotic World, Limits of Power

Current foreign policy issues bring into focus challenges for US policymakers who are mindful of Americans' waning appetite for overseas military engagements More

SADC Meeting Lesotho Officials to Resolve Stalemate

Official says regional bloc has been engaged with leaders in Lesotho to resolve political disagreement that led to coup attempt 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.
West Africa Ebola Vaccine Trials Possible by Early 2015i
X
Carol Pearson
August 30, 2014 7:14 PM
A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video West Africa Ebola Vaccine Trials Possible by Early 2015

A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video Survivors Commemorate 70th Anniversary of Nazi Liquidation of Jewish Ghetto

When the German Nazi army occupied the Polish city of Lodz in 1939, it marked the beginning of a long nightmare for the Jewish community that once made up one third of the population. Roughly 200,000 people were forced into the Lodz Ghetto. Less than 7,000 survived. As VOA’s Kane Farabaugh reports, some survivors gathered at the Union League Club in Chicago on the 70th anniversary of the liquidation of the Lodz Ghetto to remember those who suffered at the hands of the Nazi regime.
Video

Video Cost to Raise Child in US Continues to Rise

The cost of raising a child in the United States continues to rise. In its latest annual report, the U.S. Department of Agriculture says middle income families with a child born in 2013 can expect to spend more than $240,000 before that child turns 18. And sending that child to college more than doubles that amount. VOA’s Deborah Block visited with a couple with one child in Alexandria, Virginia, to learn if the report reflects their lifestyle.
Video

Video Chaotic Afghan Vote Recount Threatens Nation’s Future

Afghanistan’s troubled presidential election continues to be rocked by turmoil as an audit of the ballots drags on. The U.N. says the recount will not be completed before September 10. Observers say repeated disputes and delays are threatening the orderly transfer of power and could have dangerous consequences. VOA correspondent Meredith Buel reports.
Video

Video Ukraine Battles Pro-Russia Rebel Assault

After NATO concluded an emergency meeting to discuss the crisis in eastern Ukraine, the country is struggling to contain heavy fighting near the strategic port of Mariupol, on the Azov Sea. Separatist rebels are trying to capture the city, allegedly with Russian military help, and Ukraine's defense forces are digging in. VOA's Daniel Schearf spoke with analysts about what lies ahead for Ukraine.
Video

Video Growing Business Offers Paint with a Twist of Wine

Two New Orleans area women started a small business seven years ago with one thing in mind: to help their neighbors relieve the stress of coping with a hurricane's aftermath. Today their business, which pairs painting and a little bit of wine, has become one of the fastest growing franchises across the U.S. VOA’s June Soh met the entrepreneurs at their newest franchise location in the Washington suburbs.
Video

Video Ebola Vaccine Trials To Begin Next Week

The National Institutes of Health says it is launching early stage trials of a vaccine to prevent the Ebola virus, which has infected or killed thousands of people across West Africa. The World Health Organization says Ebola could infect more than 20,000 people across the region by the time the outbreak is over. The epidemic has health experts and governments scrambling to prevent more people from becoming infected. Zlatica Hoke has more.
Video

Video Asian Bacteria Threatens Florida Orange Trees

Florida's citrus fruit industry is facing a serious threat from a bacteria carried by the Asian insect called psyllid. The widespread infestation again highlights the danger of transferring non-native species to American soil. VOA’s George Putic reports.
Video

Video Aging Will Reduce Economic Growth Worldwide in Coming Decades

The world is getting older, fast. And as more people retire each year, fewer working-age people will be there to replace them. Bond rating agency Moody’s says that will lead to a decline in household savings; reducing global investments - which in turn, will lead to slower economic growth around the world. But experts say it’s not too late to mitigate the economic impact of the world’s aging populations. Mil Arcega has more.
Video

Video Is West Doing Enough to Tackle Islamic State?

U.S. President Barack Obama has ruled out sending ground troops to Iraq to fight militants of the so-called Islamic State, or ISIS, despite officials in Washington describing the extremist group as the biggest threat the United States has faced in years. Henry Ridgwell reports from London on the growing uncertainty over whether the West’s response to ISIS will be enough to defeat the terrorist threat.
Video

Video Coalition to Fight Islamic State Could Reward Assad

The United States along with European and Mideast allies are considering a broader assault against Islamic State fighters who have spread from Syria into Iraq and risk further destabilizing an already troubled region. But as VOA State Department Correspondent Scott Stearns reports, confronting those militants could end up helping the embattled Syrian President Bashar al-Assad.
Video

Video Made in America Socks Get Toehold in Online Fashion Market

Three young entrepreneurs are hoping to revolutionize the high-end sock industry by introducing all-American creations of their own. And they’re doing most of it the old-fashioned way. VOA’s Julie Taboh recently caught up with them to learn what goes into making their one-of-a-kind socks.
Video

Video Americans, Ex-Pats Send Relief Supplies to West Africa

Health organizations from around the world are sending supplies and specialists to the West African countries that are dealing with the worst Ebola outbreak in history. On a smaller scale, ordinary Americans and African expatriates living in the United States are doing the same. VOA's Carol Pearson reports.

AppleAndroid