NICOSIA, Cyprus--A Cyprus parliamentary vote on a controversial
bank deposit levy--a precondition for a 10 billion euro ($12.93
billion) bailout--could be delayed further and might force banks on
the island to remain closed for longer than planned, a senior
finance ministry official warned Tuesday.
The finance ministry--which yesterday ordered a two-day
extension to the island's bank holiday--was taking a "wait and see"
approach as to whether the vote would go ahead as planned later
Tuesday, said Andreas Charalambous, the ministry's director of
finance.
"The original schedule was to have a discussion and decision
this afternoon but we have to wait and see," Mr. Charalambous said
at a briefing.
"We don't like that we need to close banks and we will try to
make this period as brief as possible," he added. "But the ultimate
decision on when to return back to normality and at which pace
needs to be taken after a decision is taken in parliament and after
we have at [a] technical and political level assessed the
situation. We want to open banks in two days."
On Monday, Cyprus's parliament pushed back for a second time in
as many days a debate on the bank levy as the government scrambled
to secure votes in parliament for the measure.
The levy was initially seen placing a tax ranging from 6.75% to
9.9% on all bank deposit holders, in order to raise EUR5.8 billion
for the cash-strapped banks. But in amended legislation sent to
parliament Tuesday, the government said it would exempt small
savers with less than EUR20,000.
Cyprus's two largest banks--Cyprus Popular Bank Pcl (CPB.CP) and
Bank of Cyprus Pcl (BOC.CP)--are also facing a liquidity crunch and
the risk of massive withdrawals when they do eventually reopen for
business, now tentatively set for Thursday.
In his remarks, Mr. Charalambous tried to ease concerns, saying
the European Central Bank has indicated it would help keep the
banks afloat.
"I've heard comments by ECB officials that indicate that if the
law goes through they will provide unlimited liquidity assistance
to banks," he said.
Write to Matina Stevis at matina.stevis@dowjones.com and Alkman
Granitsas at alkman.granitsas@dowjones.com
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