Parliament Rejects Deposit Grab
The Cypriot parliament voted against a proposal to seize deposits from accounts held in Cypriot banks. Not even a single lawmaker in the 56-seat parliament voted in favour of the plan. The party of President Anastasiades abstained en masse even though he negotiated the bailout plan on Friday night. In fact the bill which was finally submitted to parliament included an amendment which would make deposits of less than EUR 20k exempt, but even this gesture was not enough to secure parliamentary approval. The ECB quickly issued a statement saying it took note of the outcome, and that “The ECB reaffirms its commitment to provide liquidity as needed within the existing rules”. Cypriot banks remain closed, although cash machines appear to be operating as normal. Although the official timeline indicates that banks are due to re-open on Thursday, this now seems unlikely given the absence of a ‘plan B’ following the parliament’s overnight rejection. Eurogroup Chair Dijsselbloem said he was disappointed the deposit tax idea had been rejected, but he stressed the Eurozone’s position remains as stated on Monday and that it is up to Cyprus to meet Eurozone demands. ECB Governing Council Member Nowotny said it is in the interests of the Eurozone for Cyprus to remain a member but added that membership demands “discipline and the readiness to act rationally”. Germany’s Finance Minister Schaeuble said Germany regrets the parliament’s decision but that no one except Cyprus is to blame. He added that two large Cypriot banks are essentially insolvent without help. Meanwhile, unnamed sources told Dow Jones Newswires that Cypriot and ECB officials are working on capital-control plans as a ‘necessary contingency’ for when banks eventually do re-open. These plans allegedly include a limit on the size of daily transactions, along with border checks for cash over a certain amount. Bank of England minutes, the UK Budget, and the FOMC decision are all due.
Click here to read the full report: UBS
UBS Investment Bank