Cypriots woke up on Wednesday to a new state of uncertainty as the island’s economy remained in financial limbo, after initially rejoicing over parliament’s rejection of a deposit tax, which would have secured bailout funding.
Lawmakers on Tuesday evening overwhelmingly rejected a plan to take up to 10 per cent of people’s bank deposits to secure a bailout by fellow eurozone countries and the International Monetary Fund (IMF) and prevent a collapse of the country’s banks.
Banks across the island remained closed on Wednesday as President Nicos Anastasiades was scheduled to hold talks with international lenders as well as political leaders and Archbishop Christostomos to discuss the country’s next steps.
ATMs have been dispensing cash and credit and debit cards were working normally although electronic transfers continued to be blocked, bank officials confirmed to DPA.
The European Central Bank responded to the vote by saying it would continue to fund the island’s banks’ liquidity as long as they comply with its Emergency Liquidity Assistance requirements.
Officials said Nicosia was looking to renegotiate its bailout deal in the next few days but was against the idea of seizing deposits.
Meanwhile, Finance Minister Michalis Sarris, who denied media reports he had offered his resignation, was scheduled to hold talks with his Russian counterpart in Moscow during the day. Anastasiades had telephone conservation the night before with Russian President Vladimir Putin.
As a result of talks between Cypriot and Russian leaders it is believed Cyprus will attempt to strike a deal with Moscow for the sale of troubled Popular Bank of Cyprus, known as Laiki, as well as the Bank of Cyprus.
Anastasiades is also believed to be looking at the option of making use of social security fund reserves, which amount to 5 billion euros and offering depositors with more than 100,000 euros natural gas-indexed bonds in return for voluntarily paying a levy.