Sunday

19th Feb 2017

Cyprus rejects bailout deal

  • Anastasiades will reopen bailout talks on the €10bn rescue package (Photo: consilium.europa.eu)

The eurozone plunged into uncertainty on Tuesday (19 March) after the Cypriot parliament voted to reject the €10 billion EU bailout plan by an overwhelming majority.

Thirty-six deputies in the 56 member House of Representatives opposed the agreement struck by finance ministers in Brussels on Saturday, with 19 members of the Democratic Rally party of President Anastasiades abstaining and one MP absent from the vote.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

The result, which marks the first time a national parliament has vetoed a eurozone bailout plan, will see the recently elected Anastasiades bid to re-open negotiations on a rescue package.

At the heart of the controversy is a planned €5.8 billion to be raised using deposits held in Cypriot banks. The original deal features a compulsory levy of 6.75 percent on deposits under €100,000 alongside a 9.9 percent tariff on savings over €100,000.

Cyprus' banks on Tuesday remained closed for a second successive day in a bid to prevent a bank run.

On a day of high drama, the Cypriot government proposed to limit the pain by exempting savers holding €20,000 or less, but it was not enough to change the vote.

Earlier, Jeroen Dijsselbloem, chair of the Eurogroup, told the Dutch parliament that the one-off levy applied only to Cyprus and would not be repeated elsewhere.

"It won't happen at all because in other countries banking sectors are not as unbalanced, they are not as loaded with as many risks and the authorities are not in a position where they can't save their own financial sector," he told deputies.

However, in a stark warning to the Mediterranean island, he added that the Cypriot contribution to the rescue package was non-negotiable. "They have to be brought back from the brink of the abyss, but that will entail a contribution of €6 billion," he told Dutch TV channel RTL 7.

For his part, Panicos Demetriades, Cyprus' central bank governor said the levy should not touch accounts under €100,000, the minimum amount that must be protected for savers under EU law on deposit guarantees.

“The credibility of, and trust in the banking sector depends on this,” he said.

Meanwhile, in a statement released following the Cypriot vote, the European Central Bank (ECB) indicated that it would not cut off emergency support to the country's banks

"The ECB takes note of the decision of the Cypriot parliament and is in contact with its troika partners," the bank said, referring to the European Commission and the International Monetary Fund.

It added that "the ECB reaffirms its commitment to provide liquidity as needed within the existing rules."

Analysis

Cyprus 'business model' was no mystery to EU

EU politicians are saying Cyprus must scrap its "unsustainable business model." But data shows the writing was on the wall ever since the island joined the euro, five years ago.

Opinion

Unfair EU-Canada trade deal is wrong response to Trump

The EU-Canada trade deal, which is to be voted on in the European Parliament next week, cements the inequalities, political exclusion and favours to corporations that feed far-right groups in Europe.

Visual Data

EU farming policy: The damage done by 20 years of inertia

The EU Commission will ask the public later this week how the common agricultural policy should be overhauled. Data from the past two decades reveals a catalogue of missed chances and failed reforms.

News in Brief

  1. Migrants storm Spanish enclave of Ceuta
  2. Spain's princess fined for tax fraud, husband sentenced
  3. EU to invest millions in energy infrastructure
  4. Dutch data watchdog forces online vote aides to up security
  5. EU allows Lithuania to ban Russian tv channel
  6. Finland announces increase in defence spending
  7. Ex-PM Blair says Brits should 'rise up' against Brexit
  8. Nato chief says facts to prevail over fake news

Stakeholders' Highlights

  1. Malta EU 2017End of Roaming Fees: Council Reaches Agreement on Wholesale Caps
  2. Nordic Council of MinistersNordic Innovation House Opens in New York to Help Startups Access US Market
  3. Centre Maurits CoppietersMinorities and Migrations
  4. Salzburg Global SeminarThe Child in the City: Health, Parks and Play
  5. UNICEFNumber of Ukrainian Children Needing Aid Nearly Doubles to 1 Million Over the Past Year
  6. Centre Maurits CoppietersThe Situation of Refugee Women in Europe
  7. Salzburg Global SeminarToward a Shared Culture of Health: Charting the Patient-Clinician Relationship
  8. European Free AllianceAustria Should Preserve & Promote Bilingual and Multinational Carinthia
  9. Martens CentreShow Your Love for Democracy! Take Part in Our Contest: "If It's Broken, Let's Fix It"
  10. CISPECloud Computing Leaders Establish Data Protection Standards to Protect Customer Data
  11. Malta EU 2017Landmark Deal Reached With European Parliament on Portability of Online Content
  12. Belgrade Security ForumBSF 2017: Building a Common Future in the Age of Uncertainty