Cyprus became the latest euro zone domino to teeter in 2012 just when the worst of the crisis appeared to be over. In March 2013, a compromise rescue plan backed by euro zone finance ministers called for Cyprus to wind down one largely state-owned bank, Popular Bank. The raid on Popular Bank was intended to raise most of the 5.8 billion euros that Cyprus was required to raise as part of the bailout.
Cyprus MPs to debate ’difficult’ bailout deal
The Cypriot parliament begins a debate later on Tuesday on a 10-billion-euro (HK$101.5 billion) EU-IMF bailout which Finance Minister Haris Georgiades has described as a tough but necessary measure that has to be ratified without delay.
Speaking on the eve of the parliament meeting, Georgiades warned that without a positive vote on the bailout deal, the eastern Mediterranean island would be driven to full economic collapse and could be forced to exit the eurozone.
Such an outcome would be “dramatic”, said Georgiades.
He urged lawmakers to take “a very difficult but necessary decision” and ratify the agreement struck last month with a troika of international lenders -- the European Union, European Central Bank and International Monetary Fund.
It is not known whether a vote on the controversial package will be held on Tuesday or if it will be pushed to another day due to prolonged debate.
A government source told AFP the vote “hangs in the balance and could go either way”, with the ruling Disy party and coalition partner Diko “in favour” and the opposition Akel party set “to vote against” it and the social democratic Edek party still undecided.
The cabinet approved the deal on Wednesday, with government spokesman Christos Stylianides saying “ratification of the loan agreement is expected after April 26”.
The governing centre-right coalition holds a slim majority in the 56-member House of Representatives, but only if all of its MPs toe the party line.
Opposition MPs from the communist Akel party and socialist Edek have voiced their hostility to the high cost of the deal, which has surged from a total of 17.5 billion euros to 23 billion euros (HK$177.6 billion to HK$233.4 billion), putting the teetering economy under more pressure.
To secure the rescue package, Cyprus has had to radically downsize its bloated banking sector, raise taxes and cut public spending.
If all goes according to plan, Cyprus expects its first tranche of much-needed bailout cash in May.
On Monday, President Nicos Anastasiades said he was planning sweeping reforms in a bid to modernise the battered island, including lifting immunity from prosecution for the president and other politicians.
MPs on Tuesday are also expected to thrash out new and unprecedented reforms Anastasiades said were needed for a “bold new start” in Cyprus, which has come under increasing pressure from the public and the EU to eradicate perceived political corruption.
Georgiades also called for “structural reforms... to kick-start the economy, saying: “We must also acknowledge the mistakes of the past and not to look for insufficient and unviable alternatives.”