Eurozone still ready to help Cyprus after vote

Eurozone finance ministers said Tuesday they still stood ready to help Cyprus after the island's parliament voted down a debt bailout accord which included an unprecedented bank deposit levy.

A Cypriot protestor holds a banner during a demonstration against an EU bailout deal outside the parliament in the capital, Nicosia, on March 19, 2013. Cyprus MPs on Tuesday overwhelmingly rejected a tax on bank deposits demanded by international lenders as a condition for a bailout deal, with a vote of 36 against, 19 abstentions and none in favour.

"I confirm that the Eurogroup stands ready to assist Cyprus in its reform efforts and reiterate the position of the Eurogroup" given Monday when it offered easier bank levy terms so as to reduce the impact on smaller savers, Dutch Finance Minister Jeroen Dijsselbloem said in a brief statement.

Monday's statement suggested that Cyprus spare any account under 100,000 euros -- the same amount as EU deposit guarantee norms introduced at the height of the debt crisis in an effort to reassure savers unnerved by collapsing banks.

It still required, however, Nicosia to find the 5.8 billion euros ($7.5 billion) which the bank levy was meant to raise to go alongside the 10 billion euros bailout agreed with the International Monetary Fund, European Union and the European Central Bank.

Dijsselbloem, who heads the eurozone finance ministers group, gave no indication of what further help the 17-nation eurozone might offer Cyprus.

Separately, however, he told Dutch national broadcaster NOS it was really up to Cyprus to take the next step.

"Cyprus has had some freedom from us," he said, insisting the bailout could not be more than 10 billion euros otherwise the country's debt burden would be unsustainable.

If it was more, "then they can't pay back the debt anymore and there's no way out," he said, adding: "I deeply regret Cyprus's decision but the ball is still in their court."

Meanwhile Germany, which has taken a very hard line on the Cyprus rescue, said Tuesday it regretted the vote and warned against taking the easy option.

"For now the debt is too high ... it must be reduced," German Finance Minister Wolfgang Schaeuble said in a television interview.

Warning against "irresponsible solutions," Schaeuble said "the situation is serious but this must not lead us to take decisions that make no sense."

The ECB said meanwhile it would continue to provide financial support for troubled Cypriot banks, a key step to allow all sides a little more time to try and find a way out of the impasse created by the vote.

Earlier in Nicosia, angry MPs rejected the debt accord with 36 against, 19 abstaining and none in favour of the move, prompting an explosion of joy among thousands of protesters outside parliament.

Cypriot President Nicos Anastasiades' office said he "fully respects" the decision and that he had had a "constructive" phone call with Russian leader Vladimir Putin, amid reports Cyprus was seeking alternative financing.

Under the original deal reached at the weekend, Cyprus was to raise the 5.8 billion euros through a levy of 9.9 percent on all Cyprus bank deposits above 100,000 euros and 6.75 percent on smaller accounts.

The plan triggered uproar, forcing the government to announce that accounts up to 20,000 euros would not incur the levy, with 6.75 percent charged on deposits of 20,000-100,000 euros and then 9.9 percent for above 100,000 euros.

Media reports on the island said the government may now seek other ways of making up the 5.8-billion-euro shortfall, with a bond issue, bank restructuring and trying to secure more Russian investments among the options.

Fearing a run, Cyprus has shut its banks until at least Thursday, with the stock exchange closed for the same period.

The parliamentary vote leaves Cyprus, and the eurozone as a whole, in uncharted territory amid fears of fresh debt crisis contagion again after several months of relative calm.

Before the vote, Anastasiades called an emergency meeting of party leaders for early Wednesday to "examine alternative plans to address the situation that may arise following ... the parliamentary vote".

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Writer: AFP
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