NICOSIA, March 23 (Xinhua) -- The Cypriot parliament has postponed a debate on legislation imposing a levy on bank deposits until after a Eurogroup meeting in Brussels on Sunday, parliament sources said on Saturday.
The vote on the bill had been scheduled for Saturday, ahead of a finance ministers meeting to consider a revised bailout for Cyprus, following endorsement of nine bailout related bills at a day-long session of parliament on Friday.
The sources could not say if and when a deposits levy bill will be debated.
Troika technocrats representing the European Commission, the European Central Bank and the International Monetary Fund were at the ministry of finance early on Saturday discussing final details of the bailout.
Cyprus president Nicos Anastasiades was scheduled to fly to Brussels later on Saturday accompanied by leaders of parliamentary parties to plead his position on the bailout but plans may change depending on the outcome of discussions at the ministry of finance.
However his travel to Brussels has been throwing into uncertainty following the postponement of Saturday's session of parliament.
Parliamentarians approved on Friday night bills imposing capital controls to prevent massive outflow of capital when the banks reopen on Tuesday, following an eight-day bank holiday decreed by the ministry of finance. They also passed a bill empowering the Central Bank to downsize stricken Cyprus Popular Bank and gave the go ahead for setting up a mechanism to collect revenues and issue bonds.
The mechanism was renamed into Investment Solidarity and Development Fund to reflect its additional purpose of receiving gains from future development of natural gas and channel funds into development projects, given the fact that the downsized banking sector will lack enough money for loans to businesses.
The troika is reported to have given its approval for the establishment of the Fund following its initial rejection by German Chancellor Angela Merkel.
Cyprus Popular Bank will be split into a "good" bank and a "bad" bank. The good one will take over insured deposits of up to 100,000, belonging to about 361,000 savers and also loans still being serviced.
The deposits of another 10,000 savers above the 100,000 mark will go into the bad bank, along with non-serviced loans and will be turned into frozen assets until liquidation is over after several years. These depositors may get back anything between 30 to 60 percent of their money.
A bill for imposing a levy on bank deposits was not included in the emergency legislation passed by parliament as financial authorities were still considering what sort of tax to impose and on which deposits.
The state broadcaster said that a levy of between 22 and 25 percent was being considered for deposits of over 100,000 euros in the Bank of Cyprus only, leaving untouched deposits in about 26 foreign banks operating on the island.
Depositors will be compensated with bank shares.
The state broadcaster also said president Anastasiades would get in touch with the International Monetary Fund to present the levy proposal. It has not been explained whether postponement of the vote on the levy was in any way connected with his consultations.
The levy is designed to raise about 2.8 billion euros to compliment assets totaling 3 billion euros out of selling the Greek units of Cypriot banks and the planned investment fund.
The troika had set a condition for Cyprus to raise itself 5.8 billion euros before approving a 10-billion-euro bailout so as to keep the total sovereign debt down to a mark which would make it manageable.
The troika has estimated Cyprus's financial needs until 2016 at about 17 billion euros, a sum equal to the island's GDP -hence the difficulty of the task to bailout its economy.
The bulk of the money will go to the recapitalization of the banks which received a heavy blow when EU decided a haircut of about 73 percent on Greek bonds. Cyprus Popular Bank alone has reported an net loss of 3.65 billion euros following the 2011 write-down on Greek government bonds.
Reflecting the worsening situation of the financial sector, Moody's agency downgraded the credit ratings of Cypriot banks to Caa3, which is only two notches from the end of its 11-point scale.
NICOSIA, March 22 (Xinhua) -- The Cypriot parliaments on Friday passed emergency bills aimed at clinching a bailout deal with international lenders, but left until Saturday to vote on the contentious deposit tax.
The Parliament agreed to creates a so-called investment fund, aimed at helping raise 5.8 billion euros demanded by the Eurogroup as a condition for a 10 billion euro bailout. Full story
NEW YORK, March 22 (Xinhua) -- The existing bailout tool box is enough to rescue Cyprus if it can come up with a decent plan acceptable to international lenders, said Willem Buiter, chief economist of Citigroup, at the Council on Foreign Relations on Friday.
Buiter said Cyprus accounts for 2 percent of the GDP of euro area, therefore the risk is manageable. Full story