Members of Cyprus’ parliament have voted against highly controversial plans to tax bank deposits. 36 MPs voted to reject the plan while 19 abstained.
The president of the parliament had urged MPs to vote against the measures, which he described as “blackmail.” Rejection of the tax effectively blocks a 10 billion-euro EU bailout deal that Cyprus needs to save its banks and ensure government workers continue to receive their salaries.
The stumbling block in the bailout plan were conditions announced at the weekend to tax bank accounts. Cypriot and eurozone officials proposed a levy of 6.75 percent on accounts holding less than 100,000 euros, with a 9.9 percent tax on deposits of over 100,000 euros. Many Cypriots and foreign customers of Cyprus’ banks rushed to withdraw money from their accounts in the immediate wake of the announcement and officials immediately sought to soften the blow for small savers, while increasing the contribution for those with bigger bank accounts.
Parliament was presented with a ‘plan B’ whereby accounts holding below 20,000 euros were exempt from the new tax, but that concession was insufficient to convince MPs to accept it.