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Lawmakers in Cyprus pass bailout plan

April 30, 2013|By Anthee Carassava
  • Protester shout slogans during an anti-bailout rally Tuesday outside parliament in Nicosia, the capital of Cyprus.
Protester shout slogans during an anti-bailout rally Tuesday outside… (Petros Karadjias / Associated…)

ATHENS -- Despite sweeping public discord, Cyprus lawmakers on Tuesday approved a controversial $13-billion bailout imposed by international lenders to keep the island financially afloat, and its economy anchored to Europe’s single currency.

With just a two-vote majority, though, the deal survived by a thread, eking out 29 votes in favor as calls for Cyprus’ exit from the euro currency zone mounted in the heated parliamentary debate.

In a roll call vote, capping an all-day, marathon session, 27 lawmakers in the 56-seat parliament voted against the deal, which combined with contributions from Cypriots totals nearly $30 billion, paving the way for the cash-strapped island republic to receive its first installment of aid next month.

"Unfortunately the [bailout] is a one-way street for us. It will avert disorderly default and gives, albeit with many hurdles, some prospect of getting us out of the storm," said Averof Neophytou, head of the governing right-wing Democratic Rally party.

Locked out of international markets, Cyprus needs the multibillion-dollar rescue package from its European peers and the International Monetary Fund to keep its faltering financial system from failing. The bailout comes at a steep cost: The government must implement punishing austerity measures, shut down the country’s second-largest bank and impose losses of up to 60% on deposits over $130,000 held at the island’s biggest financial institution, Bank of Cyprus.

"A 'yes' from Cyprus' parliament is by far the biggest defeat in our 8,000-year history," independent lawmaker George Perdikis said ahead of the vote. "Its democratically elected representatives have a gun to their head to agree to a deal of enslavement."

About 300 angry demonstrators gathered outside the parliament as he spoke, calling politicians “thieves.”

Ahead of the vote, the communist AKEL party, which held the presidency until early this year, said Cyprus should start looking beyond Europe for financial support.

“Cyprus’ only option is a solution outside the loan agreement,” the party said in a statement ahead of Tuesday’s debate. “Seeking such a solution is possibly tantamount to a decision to exit the euro.”

Attempts to agree on a rescue deal for the near-bankrupt island last month triggered financial chaos after the 56-member parliament rejected an initial plan that would have forced Cypriots to accept a levy of as much as 10% on all bank deposits regardless of size. A two-week subsequent shutdown of banks capped by grueling negotiations with international creditors resulted in an alternative deal that Cyprus’ coalition government said was the only option.

Despite the agreement, Cypriots still face capital controls that limit daily cash withdrawals to just over $300 -- the first time such controls have been introduced in the Eurozone, the 17 nations that use the euro.

Though a small economy accounting for just 0.2% of the Eurozone’s economic output, Cyprus saw its public finances turn sour with the Greek debt crisis. Heavily hurt by their exposure to Greek bonds, Cyprus’ banks were left with little money to bail themselves out.

“We have had enough of delusions,” government spokesman Christos Stylianides said. “We don’t have any other choice [than to accept this bailout deal]. Whoever has one should tell us what it is.”

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