Cypriot President Says Levy Isn't Likely to be Passed

By Roger Baettig | March 19 2013 8:36 AM

The euro continued to slide on Tuesday morning as Cypriot lawmakers prepared to vote on a new controversial tax amendment that would help fund the nation's debt by raising 5.8 billion euros through a levy on banks that would force account holders to shoulder the debt.

REUTERS/Yannis Behrakis

A man withdraws money from an automated teller machine at a branch of the Bank of Cyprus in Athens, Greece, on Saturday.

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The meeting has been delayed twice already as Cypriot President Nicos Anastasiades tries to garner support from fellow lawmakers.

According to Bloomberg, Anastasiades warned German Chancellor Angela Merkel that his colleagues were not likely to pass the levy. The possibility of the plan's rejection has created a stir among investors as many worry that the euro could drop even lower.

Investors with money tied up in Cypriot banks have had their accounts frozen since March 16th as authorities prepared to deduct the new tax before the banks opened again on March 19th.

However, since the tax hasn't been approved by the nation's lawmakers, banks will remain closed until the 21st to keep account holders from accessing their savings.

The situation has caused an uproar among Cypriots and investors whose funds are frozen in the country's banks. News of Cypriots desperately trying to withdraw funds at cash machines has caused capital flight in neighboring countries like Greece, Italy and Spain; where investors fear a similar levy could follow.

Cypriot officials are expected to make a decision at their meeting on Tuesday at 6 pm to discuss the levy and decide about its implementation.

One concern is the effect the tax will have on smaller savings accounts, as originally the levy would impose a 6.75 percent tax on all deposits and increase to 9.9 percent for deposits over 100,000 euros.