Members of Cyprus' parliament are still haggling over last-minute amendments to a deal that would seize private deposits to help fund a $13 billion bailout package.
President Nicos Anastasiades has voiced support for a plan that would start the depositor levy at €20K, meaning anyone below that amount would be spared the one-off tax.
“A new draft bill discussed in Parliament's finance committee proposed to spare all deposits below €20,000 ($25,900). Those between €20,000 and €100,000 ($129,290) would still have a 6.75 percent charge imposed, and those above €100,000 would have to give up 9.9 percent of their deposits, in line with the original plan put forward over the weekend,” the Associated Press reports.
For his part, Panicos Demetriades, the country's central bank governor, suggested that no levy be imposed on accounts with less than €100,000 -- the amount that is insured by the country’s government.
"The credibility of, and trust in the banking sector depends on this," said Demetriades, adding that he believes at least 10 percent of deposits will be yanked the moment Cypriot banks re-open.
Although both of these proposals would surely quiet some of the backlash against the bailout deal, many in the country’s parliament are unhappy with the depositors tax on principal (either that or they’re terrified of what may happen should they try to confiscate money from Russian oligarchs).
Also, is appears that the proposed amendments haven't been cleared with EU officials in Brussels. From the Wall Street Journal:
European officials in Brussels were surprised by Nicosia’s unilateral move. In a conference call Monday night, euro-zone finance ministers were given “no heads-up” on the new rate, a European official said. “They are playing poker.” A second official confirmed that ministers and other European officials involved in the bailout talks hadn’t been informed about the new tax plan by Nicosia.
The problem with the amendments, and this is probably why Cyprus didn't run them by their EU creditors, is that they fall about €300 million short of the amount first agreed on in the original bailout deal.
Some have suggested that Cyprus will try to make up the difference by levying a tax as high as 15.6 percent on big-time depositors (i.e. the Russians). Problem is, Russian banks and businesses account for almost half of all Cypriot deposits. So if the 15.6 rate goes into effect, prepare for a) extremely unhappy Russians and b) massive capital flight.
As of this writing, nothing has been voted on yet. It looks like the final vote on the bailout deal will be moved until later on Tuesday (or even possibly Wednesday). Also, in case you forgot, all of Cyprus' banks are still closed for its extended banking holiday.
Stocks have traded mostly higher despite the news coming out of Cyprus:
Meanwhile, the Germans are not at all happy with the developments in Cyprus [via Zero Hedge]:
- Senior German Official - No Idea When Or If Cypriot Parliament Will Vote On Proposed Bailout Programme
- Senior German Official - Situation In Cyprus Is Bad, Reasons For This Lie In Cyprus
- Senior German Official - With No Programme, Liquidity To Cypriot Banks Is In Danger And They Cannot Open
And apparently the Cyprus finance minister has had enough:
- CYPRUS FINANCE MINISTER SUBMITS RESIGNATION - SOURCES
- MARKET NEWS CITES SOURCES ON CYPRUS FINANCE MINISTER
UPDATE: There are now conflicting reports that President Nicos Anastasiades has refused the finance minister's resignation. And now there are reports that the finance minister claims he never tried to resign.
Stay tuned. We will continue to bring you updates as they happen.
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Featured image Associated Press. This post has been updated.