Cyprus postpones vote on deposits haircut legislation

Cyprus on Sunday postponed for 24 hours an emergency session of parliament to debate legislation imposing a one-off levy on bank deposits, rejecting a request by the European Central Bank (ECB) to proceed with the vote on the legislation without any delay. Informed sources said that the postponement came after a request by President Nicos Anastasiades who is continuing non-stop consultations with close associates and Central Bank officials on how the levy will be imposed. A source familiar with the consultations at the Presidential Palace said the ECB sent an urgent message to the Central Bank of Cyprus asking for law necessary to apply the haircut on deposits to be passed on Sunday. An ECB official also visited the Presidential Palace while Anastasiades was briefing the parliamentary finance committee and passed on the request personally. However, Anastasiades turned down the ECB request and also put off until Monday morning a closed door session of parliament to brief deputies on the situation. Anastasiades has said a Eurogroup meeting which went into the early hour of Saturday put before him two options, either to accept levy of 6.75 percent on all bank deposits below 100,000 euros (130,000 U.S. dollars) and of 9.9 percent on deposits above that mark, or see the Cypriot banks collapsing on Tuesday after an immediate discontinuations of emergency liquidity assistance the ECB. According to reports leaking from the Presidential Palace, during the president's consultations with party leaders and other officials several alternative proposals were put on the table, among them one providing for a scaled levy on deposits, so that a bigger amount could be collected and do away with Eurogroup and IMF bailout loans. The Eurogroup levy aims at generating 5.8 billion euros to be used for the recapitalization of Cypriot banks following huge losses on account of their exposure to the Greek economic crisis. The measure is seen by analysts as a way at getting at Russian deposits in Cypriot banks, which have led to allegations about money laundering, a charge which is strongly denied by Cyprus. Deposits by Russians along with saving by British retirees living on the island are estimated at 37 percent of the total. The ECB was also reported to have intervened on Sunday when rumors circulated that among options discussed by Cypriot officials is to keep banks closed after a bank holiday on Monday to avoid a run on deposits. The ECB called on Cypriot banking authorities to make sure that the banks open for business on Tuesday morning. All parliamentary parties are holding emergency meetings on Sunday to decide their stance over the bank levy. Three parties have already said they will not back the vote for the legislation. Its fate depends on the stance of the two main government coalition parties which can garner an absolute majority in the 56-deputy chamber. Parliament is set to meet at 1300 GMT on Monday in a closed session and will be convened in an open session one hour later to debate the haircut legislation. (1 euro = 1.30 U.S. dollars)