The Cypriot parliament has voted against a revised bank deposit levy. The tax was meant to shave 9.9% off any deposits over €100,000 and has since caused uproar in the country.
Thirty six deputies voted against the proposal to tax bank deposits in the 56-member chamber, while 19 abstained. One deputy was not present for the vote.
“The bill has been rejected,” said house speaker Yiannakis Omirou, as thousands of protesters outside the parliament building in Nicosia erupted in cheers.
According to the proposal, a 6.75% rate was to be set for amounts between €20,000 and €100,000. Deposits of up to €20,000 euros were to remain untouched.
Passage of the bill was considered a prerequisite for a €10 billion European Union bailout for the Mediterranean island. EU finance ministers have warned that Cyprus’ two biggest banks could go bust if a bailout deal in some form is not forthcoming. The government and opposition parties have scheduled emergency talks on the bailout for Wednesday.
Cyprus has discussed the tax with its European creditors. Ministers from the 17 eurozone countries urged protection for savers with €100,000 or less and for them to be spared from the levy, after the prospect brought panic to the markets and had Cyprus dealing with the prospect of Russia withdrawing its rescue loan.
The Cypriot government’s original proposal was to tax all depositors, setting the rate of 6.75% on all deposits under €100,000 and maintaining a 9.9% tax on all deposits above that level.
In the meantime all Cypriot banks have frozen the accounts liable for the tax and stopped all transactions, including electronic and closed for a long weekend until Thursday to prevent panic.
Cyprus needed to raise €5.8 billion euros for its bailout program and was hoping to get the money in the planned bank deposits levy.