Rescue in Trouble: Cypriot Parliament Rejects Bank Account Levy

The euro bailout package for Cyprus is in jeopardy following a vote by parliament to reject a levy on holders of bank accounts in the country. Approval of the measure in some form has been set as a prerequisite for European Union bailout aid.

A Dutch-language banner held up by a protester in Nicosia proclaims: "Cyprus says 'No'"

Foto: Filip Singer/ dpa

Parliament in Cyprus voted on Tuesday night to reject a new law that would have applied a mandatory one-time levy to holders of bank accounts in the country. The levy, which was intended to raise around €5.8 billion ($7.5 billion) billion, had been a precondition for the crisis-ridden country to receive a bailout from the European Union. It would have been levied against not only Russian oligarchs and wealthy Britons, but also normal, middle-class savers.

But on Tuesday, not a single member of the Cypriot parliament voted in favor of the legislation. Some 36 members rejected the measure, with 19 abstaining. The vote led protesters outside the parliament to cheer.

Germany had been one of the main countries pushing for a tax on depositors in exchange for a bailout from the EU and International Monetary Fund with a value of around €10 billion. In the lead up to the vote, Berlin had been the brunt of protests in Cyprus, where the tone had grown ever-shriller since Monday.

One member of parliament with the country's Green Party had warned of a "new, foreign rule on the horizon." The parliamentarian conceded that the country's massively bloated financial sector had to be shrunk, "but not with a gun at its chest" and "not on the basis of plans that would destroy Cyprus' economy and turn us into slaves."

During the debate that took place before the vote, a member of parliament with the European Party took direct aim at Germany, saying, "All parties of the German parliament have spoken about us in a very offensive manner. They said that money laundering takes place here -- as if it isn't something that could happen in their country."

It remained unclear on Tuesday whether the "no" vote would cause the bailout package to collapse. Cypriot media outlets reported that President Nikos Anastasiades planned to meet with leading politicians in the country on Tuesday night in order to discuss the path forward.

dsl -- with wires