Cyprus Rejects Controversial Tax on Deposits

The parliament of Cyprus rejected a controversial bank deposit levy earlier this week, a precondition for receiving a very pricey bailout. This quickly tore up the four day old loan deal the country already negotiated with European and international creditors that is need badly to break off default and a meltdown in its financial sector.

Many people believe that the stock market’s reaction to the Cyprus banking crisis was a case of willful denial, according to Mark Hulbert’s discussion on Markets Hub.

Coming in after days of political talks in the Cypriot capital, the vote means that a new deal, if it’s possible to even make one, will have to be done in days or Cyprus might face a total collapse of its banks. Many analysts believe that if that is to happen, it will send the tiny nation flailing out of the Eurozone.

After a long two hour debate on the divisive federal tax, there were 19 lawmakers from Cyprus’ Democratic Rally party, led by President Nicos Anastasiades that were abstained from the vote; this decision made sure that the plan would be rejected. The rest of the lawmakers in Cyrpus’ 56 seats of parliament had voted against the plan.

The rejection of this particular bill will only leave Cyprus with a few options. They could renegotiate the deal on the tax deposits with the European creditors, but they are also forming a Plan B that involves support for its banks from Russia.