Resistance in Cyprus Grows to Europe’s Bailout Plan
Patrick Baz/Agence France-Presse — Getty Images
Cypriots held up their palms reading “No” during a protest against a bailout plan outside the Parliament in Nicosia on Monday.
By LIZ ALDERMAN Published: March 18, 2013
NICOSIA, Cyprus — Leaders in Cyprus and Brussels scrambled Monday to contain the fallout from an unprecedented effort to force ordinary bank depositors in this crisis-hit nation to pay for part of an international bailout, as stock markets faltered on concerns about the wider implications for Europe’s long-running debt crisis.
President Nicos Anastasiades was trying to compel policy makers in Brussels to soften demands for a tax to be assessed on Cypriot bank deposits, saying European Union leaders used “blackmail” to get him to agree to those conditions early Saturday in order to receive a bailout package worth 10 billion euros, or $13 billion.
Cyprus, whose banking system is verging on collapse, is now the fifth nation in the 17-member euro union to seek financial assistance since the crisis broke out three years ago.
As anger in this country swelled against the measure, Mr. Anastasiades delayed an emergency parliamentary vote on the bailout plan until Tuesday, the second step in as many days. Faced with a lack of support from lawmakers, the vote could be delayed until as late as Friday.
The government also said it would keep Cypriot banks shuttered until at least Wednesday, beyond a bank holiday that was supposed to end Monday, a move aimed at staving off a possible bank run.
Cyprus’s banking association issued a statement calling on people to remain “calm,” saying it was ready to implement whatever measures were needed to protect the stability of the banking sector. The association said it would instruct banks to load automated teller machines with cash while banks remained closed.
Financial markets stuttered on the news, with Asian stocks suffering the most, closing down about 2 percent. European market indexes were off about 1 percent by the end of the session, and Wall Street shares were less than 0.2 percent lower in afternoon trading.
For the first time since the onset of the euro zone sovereign debt crisis and the bailouts of Greece, Portugal and Ireland, ordinary depositors — including those with insured accounts — were being called on to bear part of the cost, €5.8 billion.
The previous bailouts have been financed by taxpayers, and the new direction raised fears that depositors in Spain or Italy, two countries that have struggled economically of late, might also take flight.
A crowd of protesters gathered in front of the presidential palace, shouting angrily at Mr. Anastasiades and inveighing against Germany and European leaders as he entered the building to meet with his cabinet. “Merkel, U stole our life savings,” read one banner tied to a bus stop. “EU, who is next, Spain or Italy?” read another.
Miguel Arias Cañete, Spain’s agriculture minister, told journalists in Brussels on the sidelines of a European Union meeting on Monday that he saw no risk of contagion. Spain’s banking system had undergone “a very rigorous clean-up,” the minister said, and were now in a “magnificent situation” following their bailout last year.
The finance ministers from the euro zone countries were to take up the Cyprus issue on a conference call later Monday. Jeroen Dijsselbloem, the president of the group, had declined Saturday to rule out taxes on depositors in countries beyond Cyprus, although he said such a measure was not being actively considered.
A key question for the finance ministers was expected to be whether any revised formula for the tax on deposits could still deliver the 5.8 billion euros agreed to in the bailout deal. The plan, a so-called bail-in, also would wipe out 1.4 billion euros held by junior bondholders in Cypriot banks. Only senior bondholders, who have paid a premium to be first in line for repayment of their investments, would be fully protected.
Joerg Asmussen, a member of the European Central Bank governing council, suggested that creditors may not object to a revision of the bailout terms.