Official: Cyprus lawmakers to vote on bailout deal

AP News
Posted: Apr 16, 2013 5:11 PM
Official: Cyprus lawmakers to vote on bailout deal

NICOSIA, Cyprus (AP) — Cyprus' parliament must vote on the 23 billion euro ($30 billion) bailout deal the country has agreed upon with international creditors, the Cypriot attorney general said Tuesday.

Petros Clerides confirmed to The Associated Press that the deal Cyprus has reached with the International Monetary Fund and its partners in the 17-nation eurozone must secure parliamentary approval to become valid.

Some lawmakers have insisted that they vote on the deal since it will need parliamentary approval from six other eurozone countries.

Clerides didn't say when a vote would be held, but it should be soon given that the tiny island nation faces a cash crunch in next month that could leave it bankrupt.

It's unlikely that lawmakers will vote down the deal despite wide anger over its terms. The deal imposes extensive losses on deposits over 100,000 euros in the country's two biggest banks, the Bank of Cyprus and Laiki.

Cypriot Finance Minister Harris Georgiades said the country would slide into insolvency if a deal isn't ratified this month. European officials say Cyprus should receive the first bailout money in early May.

Cypriot lawmakers have already approved many of the austerity measures that were mandated by the creditors — the European Commission, the European Central Bank and the IMF. They include cuts to government salaries, tax increases and breaking up Laiki — hard hit from its exposure to bad Greek debt — into a "good" bank that will be folded into the larger Bank of Cyprus and a "bad" bank that will be wound down.

The new vote will cover extra measures that have been agreed upon since then.

As part of its bank restructuring, and to prevent a run on the country's banks, Cypriot authorities have imposed a series of capital controls — the first that any country has applied in the eurozone's 14-year history — including a daily 300 euro withdrawal limit. Officials said the restrictions would be lifted gradually as trust in the banks is restored.

Cyprus' economy is projected to shrink by 13 percent of gross domestic product over the next two years.

Meanwhile, Cypriot President Nicos Anastasiades accused Central Bank Governor Panicos Demetriades of failing to do his job supervising the country's banking sector.

In a April 15 letter to European Central Bank chief Mario Draghi, the Cypriot president said Demetriades' decision to provide more than 11 billion euros of emergency funding to prop up the effectively insolvent Laiki instead of pulling the plug before February's presidential election "demonstrates his failure of effective and prudential regulation and supervision of the banking system."

Anastasiades said Demetriades "clearly failed or omitted to properly instruct" the audit firm Alvarez & Marsal, which is investigating both the Bank of Cyprus and Laiki. He said the fact that Laiki's restructuring has been dragging on for weeks "is largely attributable to the shortcomings of the Central Bank of Cyprus."

The letter is the culmination of a dispute Anastasiades and Demetriades — an appointee of the previous left-wing administration — have been having. Demetriades has said he will cooperate with the government and parliament during the country's severe financial crisis but has insisted the central bank's independence must be respected.

Parliament's Ethics Committee is now looking at whether Demetriades allegedly failed to provide lawmakers with all the necessary information regarding the Alvarez & Marsal probe.

Parliament has no authority to remove the country's central bank chief and Draghi warned in a letter leaked to local media that any bid to push Demetriades out would contravene European laws.