Cyprus adopts bailout bank bills after marathon session

September 6, 2013
People queue to withdraw their savings at a Cypus Popular Bank in Athens/AFP
People queue to withdraw their savings at a Cypus Popular Bank in Athens/AFP

, NICOSIA, September 6- Cypriot MPs early Friday finally approved two bills on restructuring the banking sector after first rejecting them and endangering the next tranche of the country’s 10 billion euro ($13.1 billion) bailout

During a marathon session on Thursday, parliament passed all of the other 12 bills required by the European Union and International Monetary Fund needed for a green light to be given at a September 13 Eurogroup meeting for the island’s second tranche of 1.5 billion euros to be released.

But they rejected bills on the structure of island’s cooperative banks and the recapitalisation of Hellenic Bank.

Under heavy pressure from Finance Minister Haris Georgiades and reported phone calls from abroad warning that the bailout could be at risk, the House of Representatives met again after midnight and adopted the two bills.

In the post-midnight revote, 41 MPs voted in favour and only 3 against legislation concerning the supervision and reform of the country’s troubled banking system.

Government spokesman Christos Stylianides told state radio the second vote had avoided Cyprus getting into “difficulties” with international lenders and that Georgiades can now go to the Eurogroup meeting and request the necessary funds that Nicosia “badly needs”.

Under the new legislation, the government will acquire 99 percent of the coops, which will come under supervision of the central bank. Over time, those banks will be able to buy back their shares.

The second bill would lead to conversion of convertible bonds at Hellenic Bank into shares, as part of the lender’s recapitalisation.

Among the 12 bills passed on Thursday were steps to boost anti-money laundering measures, a 10 percent penalty on land transfer fees for delays in submitting immovable sales contracts and a new method of calculating road tax based on vehicle emissions.

In return for the bailout, international creditors demanded the winding up of the island’s second largest banker, Laiki, and a haircut on deposits over 100,000 euros there and in largest lender Bank of Cyprus.

One of the measures adopted on Thursday would provide compensation for provident funds and pensions that had been held by Laiki.

In addition to the loss of some of their deposits, Cypriots have had to endure tax hikes and spending cuts to ensure the country secured the bailout in March.

The unprecedented eurozone haircut on deposits forced the government to close all the island’s banks for nearly two weeks in March and impose draconian controls when they reopened.

Earlier on Thursday, around 500 people protested outside the parliament against austerity measures.

The demonstration was organised by opposition communist party Akel and other leftwing groups who held up placards declaring: “Tax the rich, not the poor” and “We are not beggars”.

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