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Cyprus in limbo after rejecting bank seizures plan

March 19, 2013 • Business


Protester stand in front of a banner which reads “Cyprus Says No” during a crucial parliamentary vote on a plan to seize a part of depositors’ bank savings, in central Nicosia, Tuesday, March 19, 2013. The Cypriot government sought Tuesday to shield small savers from a plan that is intended to raise euro 5.8 billion ($7.5 billion) toward a financial bailout by seizing money from bank accounts. The plan, which is part of a larger bailout package being negotiated with other European countries, has been met with fury in Cyprus and has sent jitters across financial markets. (AP Photo/Petros Giannakouris)

NICOSIA, Cyprus (AP) — Lawmakers in Cyprus decisively rejected a plan on Tuesday to seize up to 10 percent of people’s bank deposits in order to secure an international bailout and prevent a collapse of the country’s banks.

The vote leaves the tiny Mediterranean economy in financial limbo, but hundreds of protesters outside Parliament cheered and sang the national anthem when they heard the bill failed.

Cyprus needs 15.8 billion euros ($20.4 billion) to bail out its heavily indebted banks and shore up government finances. If it doesn’t get the money, the banks could fail, Cyprus’ government finances could be ruined for years and the country could face expulsion from the 17-country euro currency union. Eurozone countries and the International Monetary Fund have pledged to provide 10 billion euros ($12.9 billion) in rescue loans if Cyprus can come up with the remainder.

With the country’s banks closed since Saturday to avoid a run, Cypriot leaders will now try to hatch a more politically palatable plan that might also satisfy officials in the eurozone and IMF.

The plan that was rejected Tuesday — with 36 votes against, 19 abstentions and one absence — had been amended to shield the smallest depositors, those with under 20,000 euros ($25,858) in the bank. But deposits up to 100,000 euros ($129,290) are supposed to be insured by all euro countries. Login to read more

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