Cypriots to vote on Bill to restructure Laiki Bank

The Cypriot parliament was last night set to vote on a Bill for restructuring the country's second largest lender, Laiki Bank. It is part of a bid to stave off bankruptcy and economic collapse by raising the €5.8 billion demanded by the troika to qualify for a €10 billion bailout.

A source close to the negotiations told The Irish Times the ruling Democratic Rally and its partner the Democratic Party, with 28 of the 56 seats, would vote in favour, while the Communist Akel would vote against and the socialists would abstain, allowing the measure to pass.

A hotly contested Bill imposing a tax of 22-25 per cent on deposits over €100,000 in the Bank of Cyprus, the country’s largest, could be voted on today, the source stated. The sum raised should ensure Cyprus will have the €5.8 billion euro in hand to qualify for a €10 billion bailout as well as continued EBC assistance to maintain the liquidity of Cypriot banks.

The source said once the entire legislative package was adopted, the party leaders would go to Brussels to present it to the troika – the European Central Bank, the European Commission, and the International Monetary Fund – with the aim of ensuring they stick to the arrangement.

Ruling party legislator Prodromos Prodromou said the most important item for the troika was Laiki’s restructuring. The original demand included restructuring the Bank of Cyprus, the largest lender, as well, but a compromise was reached.

The Germans insisted on a "revised banking model for Cyprus", he stated. This involves shrinking the country's financial sector, largely by divesting it of large deposits from Russia and eastern Europe.

Strict controls
Before Tuesday, when banks are set to reopen, strict controls are to be imposed on financial transactions to prevent a run on banks and and a flight of capital from Cyprus.

The government’s proposal for a solidarity investment fund has run into opposition from Germany, which has rejected nationalisation of pensions and provident funds – valued at €3.5 billion – in exchange for government bonds that would be financed by future revenues from exports of natural gas from offshore fields.

Hundreds of Cypriots besieged parliament yesterday, braving high winds bearing stinging sand and branches from trees in the nearby park, chill rain and hail. A senior officer of the Laiki (Popular) Bank due to be restructured refused to speak to media but staff members did not hesitate to voice their anger.

One asserted: “We will lose our savings, our jobs, our homes, our futures. We are taxpayers. We are entitled to unemployment benefits . . .

“We are at war. In a war you lose all. In a war there are bodies in the streets.”