Cyprus has postponed its parliamentary vote on a bank deposits levy by a day.
Yiannakis Omirou, the speaker of parliament, said the delay was needed to give the government time to amend an international bailout deal agreed on last week.
That deal includes a levy on bank deposits as a condition of rescue loans. The Cypriot government is now trying to modify the deal to lower the burden on small savers with less than €100,000 in the bank.
The modification must be approved by the other eurozone finance ministers before the Cypriot parliament can vote on it.
The vote is now expected to be at 6pm local time (4pm Irish time) tomorrow.
The plan to raid accounts came as a surprise and stoked fears that deposits in other countries could be targeted. Shares around the world and the euro took a pounding even though the Cypriot economy accounts for only 0.2% of the combined output of the eurozone.
“The damage is done,” said Louise Cooper of CooperCity. “Europeans now know that their savings could be used to bailout banks.”
The government is now trying to get a better deal for small savers. The original plan foresaw a one-off levy of 6.75% on savings, rising to 9.9% for those above the €100,000 mark.
MPs are considering how to amend the deal without reducing the total €5.8bn earmarked to be raised through the measure. One solution doing the rounds is to make the tax more graduated, placing a one-time 3% levy on deposits below €100,000, rising to 15% for those above €500,000.
The government has a battle to get a majority in the 56-member Parliament – a scenario that could cripple the Cypriot economy.
There are 25 MPs from communist AKEL, socialist EDEK and the Green party who say they would vote down the levy that they had criticised as disastrous.
Any modification must be approved by the other eurozone finance ministers before the Cypriot parliament can vote on it.
“I believe (the levy) was a bad idea but they imposed it on us,” Cypriot finance minister Michalis Sarris said.
He added that the levy was the least worst option since the country’s euro area partners had insisted on a much larger savings cut.