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Cypriot parliament adopts bills laying basis of anti-crisis package

March 23, 2013, 5:41 UTC+3
Voting on the other bills was postponed till Saturday
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NICOSIA, March 23 (Itar-Tass) – Cyprus’s parliament late Friday approved three of nearly a dozen bills that will provide the basis for the national anti-crisis package, without which the country will be unable to get credit assistance from the European Union and the International Monetary Fund, thus avoiding bankruptcy.

The legislators unanimously voted to create an investment fund of solidarity designed for the accumulation of state and church assets, pension and social funds, and donations from citizens and companies, including foreign ones. It is assumed that this fund will issue securities for the purposes of economic recovery.

Also, without a single vote against the legislature passed a bill to impose temporary restrictions on bank transfers in emergency situations in order to prevent capital flight. This measure is to be taken in anticipation of next Tuesday’s re-opening of the country's banks after the bank holiday, declared last Saturday.

A rather long debate preceded the adoption of the third bill on the recovery of the banking system. The bill empowers the government to restructure problem banks by pooling "toxic" assets into a separate structure - so-called "bad bank," to be liquidated. It is expected that the first bank to be subjected to restructuring will be the Cyprus Popular Bank - second largest in terms of assets. It is most affected by the debt crisis in Greece and the EU decision on a massive write-off of Greek government bonds. The bill got the support of 26 deputies. Two were against and 25 abstained.

Voting on the other bills was postponed till Saturday. Among the most controversial proposals is deposit holders’ mandatory involvement in financing the national anti-crisis package. Despite the shock and outrage caused by the government’s attempt to carry out this unprecedented measure imposed by the Euro Group earlier this week, the legislators are going to discuss it again. On Tuesday, they overwhelmingly blocked the authorities’ project, which involves the introduction of a one-time tax of 6.75 percent on deposits of 20 thousand to 100 thousand euros, and a tax of 9.9 percent on all larger deposits. Now the bill has been amended. The government decided to make depositors with accounts up to 100 thousand euros exempt from the "crisis levy," but it plans to increase the tax on deposits of more than 100 thousand euros. There is no exact information as to what the proposal is really like. According to some sources, the rate will be higher than 10 percent for all deposits in excess of 100 thousand euros, while others say the tax will be imposed only the accounts in the Bank of Cyprus, but the rate will exceed 20 percent.

Cyprus’s President Nikos Anastasiadis this week was categorically reluctant to raise rates for the rich out of fear of scaring away large investors. After failing to push through parliament a bill on "trimming" the deposits he and his team began to urgently prepare a "plan B" for the crisis, relying on assistance from Russia. However, after Finance Minister Michalis Sarris on Friday returned from Moscow empty-handed, the authorities made a U-turn and decided to make wealthy investors pay.

Whatever the case, the government's proposed measures would raise 5.8 billion euros of its own funds, which is necessary under the terms put forward by the Eurogroup for Cyprus to get from creditors 10 billion euros in aid. It is likely that the proposals will be approved by the authorities. As a sign of hope for such an outcome, the Eurogroup on Friday scheduled an emergency meeting on Cyprus for Sunday. If the vote in parliament is successful, then President Anastasiadis will go to Brussels.

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