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21st May 2022

Cypriot MPs set to back €10bn EU bailout

  • Bank of Cyprus will incur heavy losses as part of the €10 billion EU bailout (Photo: Berge Gazen)

Cypriot MPs will vote on Tuesday (30 April) on whether to give the green light to the country's controversial €10 billion bailout.

The rescue package includes €10 billion from the EU and the International Monetary Fund (IMF).

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Around €6 billion is expected to be raised from a tax on depositors holding more than €100,000 in two Cypriot banks, with a further €5 billion to be raised by other one-off measures.

The centre-right government of President Nikos Anastasiades, elected in March, is confident it has the votes to approve the bailout.

But the rescue package does not enjoy cross-party support.

The communist Akel party, which holds 19 seats in the 56-member parliament is set to reject the bill, together with the five MPs sitting with the socialist Edek party.

The rejection by MPs of the first bailout proposal in March plunged the eurozone back into crisis mode.

The original rescue plan had included a 6.75 per cent levy on all savings worth between €20,000 and €100,000 - a clear breach of EU rules on deposit guarantee schemes.

Under the final terms of the agreement reached between Cyprus and its creditors, public sector cuts and tax hikes on income and businesses with 5 percent of GDP are planned.

Meanwhile, cuts in pensions and welfare benefits will bring savings worth another 4.5 percent of GDP.

It will also be expected to wind down Laiki bank, the island's second largest lender, transferring its assets to the Bank of Cyprus.

However, uncertainty about the effect of the crisis on the Cypriot economy mean that further negotiations are likely to take place with the EU in the near future.

EU economic affairs commissioner Olli Rehn has said that Cyprus could suffer a recession with a 10-15 percent drop fall in GDP in 2013.

The Mediterranean island has begun to ease rules restricting how much capital and currency in euros can be taken in and out of the island.

Analysts say that Cyprus was treated harshly by its eurozone partners because of its status as a tax haven.

There were also allegations that its banks were breaching EU legislation to combat money laundering.

Preliminary findings in a report by Moneyval and audit firm Deloitte indicated that Cyprus is now complying with anti-money laundering laws, the country's finance minister said Tuesday (30 April).

Haris Georgiades told MPs that he would "fight and close the last loophole in this issue."

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