Until the Cyprus bailout, the principle of the European Central Bank had been that depositors’ bank savings were untouchable. This principle has applied to the various bailouts for Portugal, Ireland, Spain and Greece.
However the Eurozone finance ministers announced over the weekend that there would be a one-off tax on Cypriot bank accounts imposed as part of a 10 billion euro bailout.
This measure has angered Cypriots who have already staged a number of demonstrations in Nicosia.
Although President Anastasiades agreed to the terms of the bail-out he has been taken aback by the strength of feeling against the terms. He briefed German Chancellor Angela Merkel and EU economics affair commissioner Olli Rehn on Monday evening.
The Cyprus government spokesman said that the President will also be talking to Russian President Putin during the day. The proposed tax will hit Russian depositors in Cyprus hard.
Parliament is due to convene at 6pm local time today (Tuesday). No single party has a majority in the 56 member chamber and the passage of the bill is far from certain. Tuesday’s vote has been postponed twice already in an effort to build consensus. Three parties have said outright that they will not support the tax.
Numbers are being hastily recalculated and it now appears that the tax will be tilted towards those with deposits greater than 100,000 euros and to ease the pain for smaller savers.
The Cyprus Stock exchange has suspended trading on Tuesday and Wednesday, banks remain closed at least until Thursday and Fitch ratings have put a number of Cyprus banks on negative ratings watch.