Cyprus: Two banking sector bills rejected

On Thursday evening, the Cypriot Parliament rejected two bills concerning the banking sector, the adoption of which is a prerequisite for the disbursement of a second installment of a €10 billion bailout package.

Previously, several hundred people had demonstrated against austerity measures in front of Parliament.

Parliamentarians, however, have adopted twelve other pieces of legislation required for the Eurogroup to approve the disbursement of a new €1.5 billion aid tranche during its meeting on September 13.

The rejected proposals aimed to grant the Central Bank the authority to oversee the island’s cooperative banks, which were once autonomous, and to recapitalize Hellenic Bank.

With this vote determining the fate of essential aid for the struggling Cypriot economy, the government was attempting to secure a last-minute solution. Finance Minister Haris Georgiades subsequently appeared before Parliament to negotiate a new vote.

The adopted measures include an additional 10% penalty on late payments of real estate transfer duties, as well as an increase in the vehicle registration tax based on CO2 emission levels.

“Tax the rich, not the poor,” and “We are not beggars,” read the signs held by protesters who gathered following a call from the opposition Communist Party, Akel, and other leftist movements.

A heavy police presence was deployed to prevent any escalation.

At the end of March, the European Central Bank, the European Union, and the International Monetary Fund agreed to lend up to 10 billion euros to Cyprus as part of a bailout plan featuring draconian conditions.

Cypriots, in particular, are facing tax increases and wage cuts.

The island was also forced to liquidate its second bank, Laïki, and to radically restructure its first, Bank of Cyprus, where accounts exceeding 100,000 euros were subject to a 47.5% haircut.

These levies forced the government to close all banks on the island for nearly two weeks in March and to implement strict capital controls upon their reopening, some of which remain in effect today.