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The Financial News Everyone’s Watching in Cyprus: Parliament Votes ‘No’ on Tax

Mar. 19, 2013 3:04pm Becket Adams

With zero votes in favor and 19 abstentions, Cyprus’ parliament voted Tuesday to reject the terms of a $13 billion bailout deal that included a controversial levy on all depositors.

“No to new colonial bonds, no to subjugation, no to national dishonor and raw blackmail,” said house speaker Yiannakis Omirou during the debate before the vote.

The rejection leaves Cyprus’s bailout in question. Without external funds, the country’s banks face collapse and the government could go bankrupt.

So what happens now? Here are four likely scenarios:

1. Cyprus eventually caves and approves a bailout deal that includes a depositor levy.

2. Considering that Cyprus has already been issued billions by the Russian government, and the fact that Russian banks and business account for nearly half of all Cypriot deposits, the small Mediterranean country forgoes EU assistance in favor of even more Russian bailout money.

3. The EU backs down. Afraid that Cyprus (under pressure from her own people and Russia) refuses to accept the terms of the bailout package, EU creditors amend the bailout deal in order to give Cyprus more flexibility. However, this may prove difficult as Germany is opposed to using its own cash to bailout a country so deeply involved with Russian interests.

4. No one budges and Cyprus falls apart. The country’s biggest banks fail, putting its €30 billion in insured deposits at risk. Cyprus’ entire financial system collapses, forcing it off the euro and on to its own currency.

Nicholas Papadopoulos, the chairman of the parliamentary finance committee, said banks would remain closed “for as long as we need to conclude an agreement” but stressed this would be “in the next few days.” Banks had been ordered to remain shut until Thursday while the bill was debated and amended, to prevent a bank run.

Papadopoulos said Cyprus wanted wants a renegotiation of its bailout deal.

Finance Minister Michalis Sarris flew to Moscow Tuesday afternoon to meet with his Russian counterpart, arriving there shortly before the vote — and promptly dismissing rumors that he had offered to resign in the interim.

Andreas Charalambous, a senior official at the ministry, said the aim is to extend repayment of a €2.5 billion loan Russia granted Cyprus in late 2011 when the country could no longer borrow from international markets.

He said Cyprus was also looking for “potential interest for further investment in the country.”

Charalambous also said Cypriot authorities believe depositors should be protected, but that a wholesale exemption for those below €100,000 would mean a “disproportionate” burden on large savers, and a “very detrimental” knock-on effect on economic growth.

“Because of the size of the estimated (bailout) needs, the burden on those above €100,000 would be such that it would again impact small people because it would destroy the ability of the country to attract foreign investment,” Charalambous said.

In a Monday night teleconference, eurozone finance ministers concluded that small depositors should not be hit as hard as others. They said Cyprus should stagger the seizures more, but insisted that the overall take should stay the same.

President Nicos Anastasiades, who was elected less than a month ago, told German Chancellor Angela Merkel Monday night that “the possibility of reducing the requirements from self-raised funds is being explored,” a Cypriot government spokesman said.

–

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The Associated Press contributed to this report. Featured image Getty Images

This post has been updated.

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Comments (55)

RestoreCapitalism
Posted on March 19, 2013 at 4:52pm
Bailouts never change bad behavior. Get a clue. Big government ruins economies and destroys freedom.

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- crusaderx9
  Posted on March 19, 2013 at 6:44pm
  Amen.
  
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- RayOne
  Posted on March 19, 2013 at 7:13pm
  Big Government destroys the people then rots from the inside.
  
  Report this comment
TheBurningTruth
Posted on March 19, 2013 at 4:34pm
This is what happens when a country sells its soul in exchange for loans. Being indebted to someone else means THEY control your future. So when President Marxist says, “$17T isn’t a problem” one must ask why he believes that. Years ago I concluded it is because he WANTS the US to be indebted to others. He WANTS Asset taxes (which is what the Cyprus tax was) to equalize us (excluding the elites of course). He WANTS the US brought down to the level of a Banana Republic.

He really does want to destroy the country and his mechanism is through debt.

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- JRook
  Posted on March 19, 2013 at 4:46pm
  @TheBurningTruth Interesting. However, you fail to point out that Reagan, Bush Sr. and Bush Jr. ran up $10 trillion of the debt and of course Bush Jr. left a $1.2 trillion annual deficit run rate when he left office. So while your busy labeling people based on flawed facts and pathological ideology come up with some for the other Presidents who ran deficits and particularly the companies who benefit the most from federal overspending. Cause even a fifth grader can figure out the poor are not receiving the vast majority of federal spending.
  
  Report this comment
- JRook
  Posted on March 19, 2013 at 4:47pm
  Let the country fail with little or no warning, so the wealthy suffer as much as the common citizen.
  
  Report this comment
- BehindBlueEyes
  Posted on March 19, 2013 at 4:48pm
  Soros is the puppet master for Obama. Soros said America was the only country standing in the way of the new world order. He also said that there needed to be a “managed” decline in the dollar. They are deliberately trying to collapse the system.
  
  Report this comment
- barber2
  Posted on March 19, 2013 at 4:48pm
  Agree. Obama is trying to destroy our capitalist system. Another angry idealist influenced by old radical Marxists filled with hate for the West, capitalism, white people, imperialism, and the ill-defined ” rich people who don’t pay their fair share.” If you have read about Obama’s life and mentors , it is quite obvious what is going on here. Aren’t there any rational, moderate Democrats out there ?!
  
  Report this comment
- ALL4FREEDOM
  Posted on March 19, 2013 at 5:00pm
  NOW you understand! But does anyone else? This president never had the smallest of intentions to fulfill one word of his oath of office, knew it going in, and lied through his teeth. He deserves no respect whatsoever. His subversive, if not treasonous, actions throughout his time in office are more than sufficient to compel his removal from office. How do we force the cowards in the House and Senate to do what must be done to save this country from extinction?
  
  Report this comment
- dblaess
  Posted on March 19, 2013 at 5:17pm
  @JROOK
  All presidents (all parties) through Bush Sr. we’re 5Trillion of debt. Bush Jr. Added 5 Trillion in 8 years. Obama added 7 Trillion in 4 years. Therefore, we should see at least 14 Trillion in 8 years. It would seem either your guy doesn’t have a clue or is spreading even more money to his business buddies then all other presidents combined. As senator Obama said, 9 Trillion in debt is unpatriotic (what I wonder is 17 plus Trillion?). By the way you must get paid by the post rather than by word.
  
  Report this comment
- crabbyoldman
  Posted on March 19, 2013 at 7:17pm
  obama also wants to divide the famlies, the churches, the classes of people. The republican party. Hispanics v. real americans. I could go on for hours.
  
  Report this comment
RayOne
Posted on March 19, 2013 at 4:31pm
Washington is watching also, the DEPRESSION will require explanation. The OPTICS advisor has their work cut out for them.

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riseandshine
Posted on March 19, 2013 at 4:22pm
http://www.corbettreport.com/interview-630-radio-liberty-the-cyprus-event/

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motherboard
Posted on March 19, 2013 at 4:22pm
Wise move, but they will still likely suffer a major bank run when they re-open the banks I bet. I can tell you I would pull everything I had. Heck, this event almost made me pull what I have here in the USA… I still may actually…

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- AboveMyPayGrade
  Posted on March 19, 2013 at 4:35pm
  MOTHERBOARD, I very strongly suspect that MANY Americans, having seen this shot fired across the banking system’s bow, albeit involving a bit player on the world scene, are going to be quietly drawing down their bank balances in the days and weeks to come. And I will be one of them.
  
  Heck, the money in banks isn’t earning anything worth talking about ANYWAY, so you really lose very little to have it stashed in your mattress, save for the risk of a home fire or a break-in. But at least if you get it out of the bank, your money is no longer hostage to any arbitrary decisions of the federal government.
  
  Although there IS a way that the government could discourage hoarding of cash; at some point in the near future, it COULD announce that it is altering our currency to produce new types of notes, and that after a certain date, the notes in circulation prior to that date will no longer be legal tender in this country (whether this is something that Congress would have to approve, I don’t know) – and that any old currency you wish not to lose the value of would have to be deposited in a bank and would not simply be exchanged for new notes which you could walk out of the bank with at the time of depositing the old notes. And by the time of the deadline, I’m sure the federal government would put strict limits on how much one could withdraw from a bank at a given time, if it decided to go this route, to inhibit money hoarding.
  
  Report this comment
- drs1969
  Posted on March 19, 2013 at 4:50pm
  They can save themselves, if they cut a deal w/ Russia. It would be far better than being slaves to the EU. Tell the EU where to go, just like Iceland.
  As far as pulling cash out, they’re practically begging everyone to pull it, now. Rates are below the market and, now this theft.
  
  Report this comment
- dylan
  Posted on March 19, 2013 at 4:50pm
  MotherBoard: I Know quite a few people who have taken their money out of US banks. Leave some for bills,etc. With the feds and the IRS ready to nit pick their way thru all citizen’s accounts, they acted wisely. Do not let the regime know how much money you have on hand. My father’s IRA is supposed to come to me late 2013. Doubt I’ll see much, if any, of it the way the black hearts in the regime fire up the smoke and mirrors.
  
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AboveMyPayGrade
Posted on March 19, 2013 at 4:21pm
So Nicholas Papadopoulos said, “It has not been (implemented) in any other country in Europe and we don’t wish to be the experiment of Europe.”, huh?

Well, tough beans, Nick.

When someone mismanages their own affairs and then is forced to come hat in hand to others to save them from the consequences of their own bad decisions, they aren’t in any position to make demands of their saviours as to HOW their salvation is to be effected.

I have very little sympathy for the people of Cyprus (and just as little for the denizens of Detroit) on how painful any measures that will put their house in order again have to be for them. They ELECTED the idiots who got them INTO this mess in the first place, so they’ve helped pave their OWN road to hell.

Some people, unfortunately, just don’t want to learn the easy way, and as a result, they’re forced to learn in that school from which there is NO truancy: the School of Hard Knocks.

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- drs1969
  Posted on March 19, 2013 at 4:52pm
  Coming soon, to your neighborhood.
  
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AboveMyPayGrade
Posted on March 19, 2013 at 4:10pm
CAVALLO, you posted: “Me thinks someone made them an “offer they can’t refuse”.”

Yeah, and I’ll bet that this someone(s) dines on borscht and Beluga caviar rather than linguine and manicotti.

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wilbstal
Posted on March 19, 2013 at 4:09pm
DING<DING< stop spending you A Holes………………………..

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wilbstal
Posted on March 19, 2013 at 4:08pm
They need a good shooting revolution that ends up killing all the A holes who spent all the money and stole cash and lived high on the Hog while others got screwed around. Pay back is due

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wilbstal
Posted on March 19, 2013 at 4:05pm
Listen this problem is simple, they spent more money than what they take in. This is a kiddy mentality problem. Stop frigging spending more than what you have. This is what got them in trouble just like the A holes Liberals in America. None of these Commie bastards can balance a simple check book. Screw them all let them starve they asked for it. QWelfare for the lazt Liberals there I know we have the same problem in America 47% of lazy bastards mooching our tax dollars for free

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bharris0
Posted on March 19, 2013 at 4:03pm
Chalk up another strike against socialism and left wing economics.

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- barber2
  Posted on March 19, 2013 at 4:36pm
  Unfortunately the Left never learns ! Remember the old USSR ?!
  
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Force2bewreckin
Posted on March 19, 2013 at 3:56pm
Pull an “Iceland” throw the bankers in jail. Forgive the money owed to crooks from foreign bank while honoring debt to banks that only operate in your country. Get back to a prosperous future.

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- drs1969
  Posted on March 19, 2013 at 4:54pm
  10 likes! /\
  
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Snowleopard {gallery of cat folks}
Posted on March 19, 2013 at 3:52pm
Excellent, we can still expect Obama to do the same here at some point.

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OUTLAW_WEALTH
Posted on March 19, 2013 at 3:50pm
Ya know what? the banksters SHOULD go bankrupt. That’s what happens when you mismanage things, you PAY the CONSEQUENCES.

Fiat money is all illusory anyway. There’s a reason why people have used hard commodities as a means of a exchange. Like gold, like silver, like anything which has value to trade.

Not these funny looking pieces of paper that a gang of thieves and other government officials proclaim are “legal tender”. If there were any value to the paper, you would not have to print “legal tender” on it. People would know and assess value without governments and other thieves pretending.

Hey, folks, the fiat Federal Reserve Note (emporer) has no clothes. It’s obvious.

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rich43068
Posted on March 19, 2013 at 3:42pm
But here in the US, the tax on asset sales like homes of 3.5% is still in effect thanks to ObamaCaresless.

That’s the same thing! Theft!

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zetuff
Posted on March 19, 2013 at 3:41pm
uh o==http://www.israelunseen.com/obamas-middle-east-trip-map-erases-israeli-territory/

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hauschild
Posted on March 19, 2013 at 3:37pm
With bankruptcy – like ripping the band-aid off quickly – people will find that most of their angst and procrastination didn’t amount to a hill of beans. The politicians will do anything to avoid it because they’ll lose their power.

Idiots.

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Sargeking
Posted on March 19, 2013 at 3:27pm
There’s really only two viable options for the Cypriots. Pull their money out of the Cyprus banks and then convert their Euro’s into real money, such as the English Pound. Otherwise if they just open door number one, then door number two will soon close and they won’t have the key to reopen it. For sure they are going to lose something on their Euro’s because the Pound is a stronger monetary unit but if they “hedge their best option” they will end up with an empty bottle of Metaxa. To the Cypriots I say, “Bottom’s up today, eat tomorrow”!

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SaturdaysWarrior76
Posted on March 19, 2013 at 3:23pm
Nobody is going to trust those banks after this. People are going to be pretty leery about putting their money in those banks now.

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grams09
Posted on March 19, 2013 at 3:15pm
My money would be pulled out of those banks today.

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00gabooga
Posted on March 19, 2013 at 3:15pm
They’ll have another vote after Parliament has had a chance to withdraw their money from the banks.

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- AMERICA4EVER
  Posted on March 19, 2013 at 4:22pm
  Just like Enron did to its investors.
  
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Sargeking
Posted on March 19, 2013 at 3:14pm
Cypriot’s unite and pull your money out of Cyprus while you still have any left!

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- P.Tfamily
  Posted on March 19, 2013 at 11:59pm
  They have shut the banks, no one can pull their money out. It is not like the people were given a warning.
  
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progressiveslayer
Posted on March 19, 2013 at 3:13pm
That’s the spirit bite the bullet and do away with your socialist government and ‘freebies’ for all. You’ll go through some pain and recover,as for new Amerika our candy@ss politicians will continue to spend until the system collapses, it’s all in the plan.

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- Ben__Franklin
  Posted on March 19, 2013 at 3:20pm
  The thought of Pitch Forks, Torches, Tar, and Feathers scared the politicians straight.
  
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Cavallo
Posted on March 19, 2013 at 3:09pm
I also bet there will be quite a few who will pull money out. I would. If they can get this close this time, they might succeed next time. Time to relocate your funds!

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- progressiveslayer
  Posted on March 19, 2013 at 3:15pm
  There’s another way to look at it,if they get their money out what will the value be at that time? I suspect they’ll have hyperinflation so getting their money may be an act of futility.
  
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- WarMunger_Al
  Posted on March 19, 2013 at 3:45pm
  prog-
  as long as it is the euro, the value is the same across europe, so it will stay solid until the euro dives. This of course should boost gold and silver prices.
  
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Cavallo
Posted on March 19, 2013 at 3:07pm
Bravo!.. Me thinks someone made them an “offer they can’t refuse”. I wonder how many found horse heads in their beds? (I doubt they did this on an ideology of liberty).

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- drs1969
  Posted on March 19, 2013 at 4:56pm
  Theft is theft. It’s easy to vote against it. They need to get out the EU. It’s their only hope.
  
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- dublinthewagons
  Posted on March 19, 2013 at 5:28pm
  Russia will take control of all their oil exploration and in the end will annex a bankrupt Cyprus.
  Totolitarianism is headed for cyprus. Fast as you can cuss the cat.
  
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