Cyprus parliament to vote Tuesday on deposit tax legislation

Cyprus parliament on Monday postponed for a second time and for a further 24 hours a crucial vote on legislation imposing a levy on bank deposits as part of a bailout plan decided by eurozone finance ministers last week.

Passage of the bill is in no way certain, as the coalition government lacks a majority in parliament and will rely on the possible support of one lawmaker who says he has not yet made up his mind how he will vote.

The Eurogroup made an unprecedented decision at the end of a marathon bargaining in the early hours of Saturday, imposing a so-called bail-in, or haircut, on Cyprus, meaning all depositors have to pay a one-off tax. This was fixed at 6.75 percent for deposits up to 100,000 euros and at 9.9 percent for deposits above that amount.

Parliament Speaker Yiannakis Omirou said after a briefing of lawmakers by President Nicos Anastasiades that debate on the levy would be delayed until 1600 GMT on Tuesday as several amendments to the bill were still under consideration.

Government officials hurried throughout the day to revise the terms of the levy in the hope of building up consensus, as government and opposition parties are dead split in the 56-member House of Representatives. Some lawmakers are considering voting against the party line.

Sources said a pardon for deposits fewer than 25,000 euros is under consideration to spare people who have small amounts of money in current accounts mostly for the convenience of paying by plastic card.

Eurozone officials did not object to the revision, saying it is up to the Cypriots to formulate the scales of the levy, as long as it generates the original amount set at 5.8 billion euros (7.5 billion U.S. dollars) to go towards partial recapitalization of the banks.

Cypriot banks were estimated to need up to 10 billion euros to recapitalize following extended losses on account of their exposure to the Greek crisis.

An emergency debate in parliament originally set for Sunday was postponed for Monday, a bank and public holiday in Cyprus and then again for Tuesday night.

Banks will remain closed on Tuesday and Wednesday to avoid a run on deposits in the absence of the necessary legislation.

The Cyprus banking crisis has rattled money and stock markets along the Far East and Europe. Stock market loses up to 2 percent and the euro slipped both against the dollar and the yen.

Central Bank of Cyprus Governor Panicos Demetriades said in a briefing to parliament that the most important question is what will come if the levy bill is not passed by parliament.

In declaring an extended bank holiday, Cypriot authorities had their eye on a possible negative vote in parliament. Demetriades gave a hint that should there be a negative vote in parliament, authorities will try to consolidate the two largest lenders of the island and do it in an orderly way.

In related developments concerning the Cyprus bail-in, Russia expressed anger at the Eurogroup decision without consulting with Moscow. Russian Finance Minister Anton Siluanov said this omission may force Moscow to reconsider its tactics.

The warning came as Cyprus Finance Minister Michael Sarris will travel to Moscow on Tuesday for talks with Siluanof the following day on restructuring a 2.5-billion-euro loan which the Eurogroup considers to be essential for sustainability of the Cypriot sovereign debt.

The Eurogroup has decided a 10-billion-bailout for Cyprus, taking into account that the Russian loan will be extended from 2016 to 2021.

Russian President Vladimir Putin also expressed anger at the idea of deposits levy, describing it as "unfair, unprofessional and dangerous."

In a move to sway opposition deputies, President Anastasiades has promised that compensation in the form of bank stock to be given to savers who will have their deposits slashed will be secured by government bonds tied to future gains from natural gas development.

Vast hydrocarbon fields are believed to lie below the sea of the south Cyprus shores, but the first gas is expected to be brought up in 2018.

However, opposition parties and even deputies on the government side are still unconvinced and wait a final version of the levy bill to decide their vote on Tuesday if there will be one. (1 euro = 1.30 U.S. dollars)