News / Europe

    Cyprus Scrambles for Funds After Bailout No-Vote

    European Parliament President Martin Schulz briefs media on Cyprus situation at European Parliament, Brussels, March 20, 2013.
    European Parliament President Martin Schulz briefs media on Cyprus situation at European Parliament, Brussels, March 20, 2013.
    Selah Hennessy
    Lawmakers in Cyprus are scrambling to find billions of dollars to prop up the country's battered banking system, after rejecting a proposed international bailout deal. Meanwhile, Cyprus's Central Bank has announced that the island nation's banks, which have been closed since Saturday to prevent a run on accounts, will remain closed at least until Tuesday.
     
    Not a single member of the Cyprus parliament voted in favor of the controversial deal late Tuesday.
     
    That was good news for many Cypriots, and for foreigners with savings in Cypriot banks. The deal would have seen their accounts hit with a tax of up to 10 percent.
     
    The "No" vote leaves Cyprus needing billions of dollars, however, to prop up an ailing banking system.
     
    Countries that received Eurozone bailouts:


    • Spain, 2012: $129 billion
    • Portugal, 2011: $100 billion
    • Ireland, 2010: Ireland: $110 billion
    • Greece, 2010 & 2012: $316 billion
    In the deal with the European Union and the International Monetary Fund, the savings tax would have made Cyprus eligible for an international loan worth $13 billion.
     
    Now it is unclear how Cyprus will find the cash needs.
     
    German Chancellor Angela Merkel said she regretted the outcome of the vote, but noted that E.U. officials will wait to see what proposals Cyprus makes to the so-called troika — the European Union, European Central Bank and the International Monetary Fund.
     
    A Cypriot government spokesman said talks with the Central Bank are underway.

    Meanwhile, Cyprus's finance minister was in Moscow hoping to secure assistance from the Kremlin. Just under half of bank deposits in Cyprus belong to foreigners, most of which are believed to be Russian.
     
    Russia had severely opposed the proposed levy, with Russian President Vladimir Putin describing it as "dangerous."
     
    The chief of France-based bank KBL Richelieu, Nathalie Perlas, said the markets are hoping for a quick resolution.
     
    "The market is not expecting that this will take too much time because of the situation," said Perlas. "The parliament needs to find a solution, a way to agree."
     
    Seeking help from Russia, she said, may make the overall situation easier.
     
    Banks in Cyprus have been closed in order to prevent mass withdrawals. Cash machines have been open for small cash withdrawals.

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    Comments
         
    by: NVO from: USA
    March 20, 2013 2:45 PM
    While we explained exactly why there is a possibility of a Europe-style wealth tax in the US, it appears the American Banking Association has decided to put out fires early…

    While the crisis in Cyprus is a real concern for depositors in Cypriot’s banks, it has no implication for depositors in U.S. institutions. Depositors in U.S. banks are insured up to $250,000 and no insured depositor has ever lost money in a bank failure. The U.S. banking industry has rapidly returned to health with strong earnings, lower losses and significant increases in capital. The FDIC insurance fund has over $25 billion in reserves and the banking industry – which bears all the financial costs of supporting the FDIC – pays over $12.3 billion each year to assure adequate funding.

    Simply put, U.S. insured depositors are safe and their deposits are protected by a strong FDIC fund, a financially secure banking system and the full faith and credit of the U.S. So, it seems, the basis for not worrying about US deposits is the rule of law and the deposit insurance? Remind us again what Cypriots thought they had?

    by: CharleyX
    March 20, 2013 2:29 PM
    This is dumb. How long are they going to diddle with the Euro before they fold that currency?

    by: t Howard from: Lamar, Colorado
    March 20, 2013 2:27 PM
    Pay close attention campers. It is coming to AMERICA after these dolts have spent us into outer space. It is coming!

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