Cyprus’s Parliament was set to reject a divisive tax on bank deposits in a vote scheduled for Tuesday, a government spokesman said, a move that would push the island closer to a default and banking collapse.
A weekend announcement that Cyprus would break with previous practice and impose a levy on bank accounts as part of a €10 billion, or $13 billion, E.U. bailout prompted turmoil on European financial markets on Monday.
Cypriot and euro zone officials have sought to soften the initially proposed levy of 6.75 percent on depositors of up to €100,000 and 9.9 percent above €100,000 to ease the burden on small savers.
But passage of the bill in the 56-member chamber, where no party has a majority, was unlikely and it was not clear if the vote would even go ahead later on Tuesday if leaders were sure it would be rejected.
“It looks like it won’t pass,” a Cypriot government spokesman, Christos Stylianides, told state radio.
The House of Representatives was expected to meet at 6 p.m. local time. Rejection of the measure would effectively block a bailout that Cyprus needs to keep its banks afloat and government paying wages and welfare.
Tuesday’s vote, originally planned for Sunday, has been postponed twice already. Three parties have said outright they will not support the tax, while a fourth, in the co-governing coalition, said it cannot support it as it stands either.
President Nicos Anastasiades asked the European Union for more aid during a telephone conversation on Monday with Chancellor Angela Merkel of Germany, with a second call likely on Tuesday.
Mr. Stylianides said Mr. Anastasiades might also speak to Vladimir Putin, the Russian president.
The French finance minister, Pierre Moscovici, said the bailout was the maximum that could realistically be expected to be paid back. “Above €10 billion we are entering into a size of debt that is not sustainable,” he told reporters on Tuesday.
The tax will batter not only Cypriots, but thousands of Europeans and Russians with business interests on the island. Mr. Putin on Monday described it as “unfair, unprofessional and dangerous.”
The Cypriot finance minister, Michalis Sarris, was due to hold meetings in Moscow on Wednesday, partly to try and get an extension to an existing €2.5 billion loan.
Stunned islanders emptied cash machines over the weekend and banks are to remain shut on Tuesday and Wednesday to avoid a bank run. Hundreds of protesters rallied outside Parliament on Monday, honking horns and holding banners saying “We are not your guinea pigs!”
“If they vote for this tax they will face the fury of the people,” said Markos Economou, a 47-year-old physics teacher and father of two. “The banks and the politicians should pay for this mess, not the people.”
The island’s stock exchange also suspended trading for another two days, through Thursday.
International market reaction has been muted so far but if a vote was lost, or postponed, that could change. The uncertainty saw the euro drop 0.2 percent as it remained near a three-month low and European shares fall 0.4 percent in early trading Tuesday.
Source : The New York Times.