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Cyprus banks stay closed

March 18, 2013

Cypriot banks are to remain closed until Thursday amid fears of mass withdrawals. The country’s parliament has put off a vote on a bailout that would include a levy imposed on all bank accounts.

Protesters take part in an anti-bailout rally outside the parliament in Nicosia March 18, 2013. Cypriot ministers were trying to revise a plan to seize money from bank deposits before a parliamentary vote on Tuesday that will secure the island's financial rescue or could lead to its default, with reverberations across the euro zone. REUTERS/Yorgos Karahalis (CYPRUS - Tags: POLITICS CIVIL UNREST BUSINESS)
Image: Reuters

News agencies quoted government sources who said Cyprus' lending institutions would remain closed beyond the country's Monday holiday.

"The banks will remain closed on Tuesday and Wednesday," one of the sources told Agence France Presse.

The move comes amid outrage expressed by Cypriot bank account holders over a one-time levy that would be imposed as part of a bailout agreed by European finance ministers on Saturday.

Under the terms of the agreement as it stands, accounts with deposits of less than 100,000 euros ($130,100) would have 6.75 percent of the total withdrawn to help finance the bailout. For accounts with more than 100,000 euros, that figure would jump to 9.9 percent.

Putin's anger

There are fears that as soon as the banks do open their doors, Cypriots will try to withdraw as much money as they can from their account.

Zypern: keine Zwangsabgabe für Kleinsparer

Police sealed off parliament in the capital, Nicosia, where several hundred people had gathered to protest against the forced levy. Some waved placards that read things like,"Hands off people's savings," or "[German Chancellor Angela] Merkel go home and stay."

Many Russians also hold accounts in Cypriot banks, and the move drew an angry response from President Vladimir Putin, who described it as "unfair, unprofessional and dangerous."

Estimates vary but the Moody's rating firm estimates that Russians have up to 19 billion euros in Cypriot bank accounts - or between a third and half of the value of all Cypriot deposits.

Perhaps surprised by how strong the public reaction has been, Eurozone finance ministers were to hold a conference call on Monday evening to discuss the bailout.

Earlier on Monday, the speaker of the Cypriot parliament, Yiannakis Omirou, announced that a vote on the bailout had been put off until Monday evening.

This came after President Nicos Anastasiades met with lawmakers to try to convince them to approve the bailout, but many parliamentarians have expressed their disapproval, making the outcome of the vote uncertain.

Attempt to ease the burden

The president had gone on national television on Sunday night to try to sell the bailout, including the controversial levies, to the general population. Anastasiades said there was no good alternative to the bailout and that without it, Cyprus would go bankrupt. At the same time, though, he also promised to try to ease the burden on less wealthy account holders, by shifting more of the levy to those with deposits of more than 100,000 euros.

There were indications from the eurozone on Monday, that this could be possible.

"It is up to the government alone to decide if it wants to change the structure of the ... contribution [from] the banking sector," European Central Bank (ECB) policymaker Jörg Asmussen told reporters in Berlin. However, he also stressed that whatever Cyprus did, it would need to maintain a contribution of 5.8 billion euros as agreed in the weekend deal, worth a total of 10 billion euros.

Chancellor Angela Merkel's spokesman, Steffen Seibert, also said it was up to Nicosia to decide how to finance the deal.

"How the country makes its contribution, how it makes the payment, is up to the Cyprus government," Seibert said.

Reaction from the markets was unfavourable on Monday, with the bailout deal sparking a dive in European stock indices and a drop in the value of the euro.

pfd/jr (Reuters, dpa, AFP, AP)