NICOSIA, March 17 (Xinhua) -- Cyprus President Nicos Anastasiades made a dramatic appeal to lawmakers on Sunday to pass the legislation imposing a one-off levy on deposits in Cypriot banks in return for international aid.
The appeal came in the form of a televised address to the nation at the end of a day marked by non-stop consultations on finding ways to convince reluctant lawmakers to vote for the levy on bank deposits.
President Anastasiades requested postponement of an emergency session of parliament for 24 hours to Monday when it became clear that opposition parties would reject the measure.
The latest line-up in the 56-member House of Representatives showed 28 solid negative votes, with the possibility of up to two deputies from the ruling coalition parties to vote with the opposition.
If reluctant deputies do not change their mind, Monday's vote in the Cypriot parliament will lead to a nightmarish situation described by Anastasiades in his address -- an uncontrolled collapse of the island's banking system.
The second largest bank, Cyprus Popular Bank, will cease to exist on opening for business on Tuesday, after Monday's bank holiday, as the European Central Bank (ECB) gave warning of immediately discontinuing its Emergency Liquidity Assistance (ELA), and the largest lender, Bank of Cyprus, will cease operations following an expected run on deposits.
The Eurogroup has announced a levy of 6.75 percent on all deposits in Cypriot banks below 100,000 euros (130,000 U.S. dollars) and of 9.9 percent on sums above this mark to generate up to 5.8 billion euros for the recapitalization of the banking sector.
The decision has alarmed politicians and bankers across Europe as it is considered to be setting a precedent introducing an uncertainty element in investments and deposits.
The ECB intervened on Sunday in a move to secure an immediate vote by the Cypriot parliament on the deposits levy, fearing a bank run in European countries when banks open for business on Monday.
However, Anastasiades rejected the move as this would most certainly lead to a vote rejecting the levy legislation and the collapse of the banking system, leaving Cyprus without money in the public coffer and possibly forcing it to exit the eurozone.
In a move to convince some deputies to change their vote to "yes," Anastasiades bargained with party leaders over offering compensation to depositors beyond bank shares offered originally. He accepted a suggestion by a small party to compensate depositors by offering government bonds covered by expected income from exploiting recent finds of natural gas in marine fields.
In a move to minimize a run on deposits when banks reopen, Anastasiades also offered compensation to depositors by refunding half of their loss, if they keep their deposits in Cypriot banks for two years.
According to yet unconfirmed reports, the Central Bank of Cyprus informed the government and banks that it has safeguarded bank liquidity by raising 5 billion euros from unspecified sources. (1 euro = 1.30 U.S. dollars)