Cyprus MPs reject bailout levy
March 20 , 2013
Cyprus' parliament on Tuesday rejected a controversial levy on bank deposits.
No MPs voted in favor of the bill, with 36 voting against and 19 abstaining.
The finance ministry has said it will modify the $13 billion deal agreed with the European Union and the International Monetary Fund by proposing an exemption for small-scale savers.
Savers with less than $25,750 would be exempt from the charges while those with over $128,750 would still be charged at 9.9 percent. Depositors in between the two spectrums must pay 6.75 percent.
The decision to tax larger deposits at a higher rate has angered Russia as many Russian nationals hold those deposits.
EU finance ministers had previously warned that two of the country’s biggest banks could collapse if the deal failed to go through in some form.
However, following the vote the European Central Bank (ECB) announced it would continue to support struggling Cypriot banks "as needed within the existing rules".
Cyprus’ banks are expected to remain shut until at least Thursday. The local stock exchange is also closed.
The Mediterranean island nation’s banks were badly exposed to Greece, which itself has been the recipient of two large bailouts.
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