NICOSIA, Cyprus (AP) — Cypriot lawmakers on Tuesday rejected a critical draft bill that would have seized part of people's bank deposits in order to qualify for a vital international bailout, with not a single vote in favor.
Nicosia will now have to come up with an alternative plan to raise the money: the government could try to offer a compromise bill that would be more palatable to lawmakers.
Proponents of the deposit seizure argued it would have made foreigners who have taken advantage of Cyprus's low-tax regime share the cost of the bailout of the banks, which have been hit hard by their over-exposure to bad Greek debt.
Opponents say a blanket charge on people's bank accounts will hurt ordinary Cypriots more, and could shake the confidence of all in the country's banking sector.
Charalambous 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.
Nicosia will now have to come up with an alternative plan to raise the money: the government could try to offer a compromise bill that would be more palatable to lawmakers.
Proponents of the deposit seizure argued it would have made foreigners who have taken advantage of Cyprus's low-tax regime share the cost of the bailout of the banks, which have been hit hard by their over-exposure to bad Greek debt.
Opponents say a blanket charge on people's bank accounts will hurt ordinary Cypriots more, and could shake the confidence of all in the country's banking sector.
Charalambous 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.
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