This is fast-moving story.
At this time the Eurogroup of eurozone finance minisers are holding a video conference to thrash out possible revisions to the bailout deal that sparked loss of confidence and increased volatility in financial markets worldwide and forced a rethink by eurozone creditors, even as the uncertainty forced a prolonged closure of the island's banks.
A Central Bank official confirmed that all bank branches on the island will remain closed until at least Thursday while politicians review with lenders an unprecedented demand for every account holder on the island to pay a tax of at least 6.75 percent on their balances as part of the rescue package.Investors across the world have been spooked by a radical bailout plan for Cyprus involving a raid on bank deposits held in the nation's banks, a plan Nicos Anastasiades, the island's president, has described as "painful" but "necessary". The proposal to impose an “up front one-off stability levy applicable to resident and non-resident depositors” has sparked chaos in Cyprus, where politicians are working to avoid a run on the banks after ATMs were depleted within hours of the announcement on Saturday morning, and anger across the EU.
Banks were closed anyway Monday for a scheduled public holiday but the uncertainty over the fate of the latest eurozone rescue package sparked jitters on world markets and fury from another key Cyprus creditor, Russia.
A final decision has to be taken on the details of the levy on balances before bank branches can reopen, or else there will be a run on accounts as depositors scramble to protect their money.
The origional tax planned was a 9.9pc raid on deposits of more than €100,000 and 6.7pc on all other deposits, thogh rumors have been flying all day as to what revisions will be made, with assurances that there are attempts to lessen the amounts for small depositors.
The uncertainty over the EU bailout terms dealt a serious blow to global confidence by stoking fears that other eurozone countries in difficulty might be called on to take the same course of action.
There are hopes that Russia, where many citizens hold significant bank deposits in Cyprus, will play a key role in rehabilitating the island's struggling banks. EU officials say they expect Russia to extend a €2.5bn loan to the debt-stricken government by five years until 2021, though no decision has yet been reached. Russian investors are also expected to get involved in recapitalising Cypriot banks. Vladimir Putin, president of Russia, has reportedly spoken out against the Cypriot bailout, branding it "unfair, unprofessional and dangerous". Russian banks had about $12 billion placed with Cypriot banks and corporate deposits amounted to $19 billion at the end of 2012, according to Moody's rating agency.Europe's main stock markets lost ground and the euro fell. Asian equities also fell heavily as did the price of oil.
US Treasury Department issued the following statement:
The Treasury Department is monitoring the situation in Cyprus closely, and Secretary Jacob Lew has been speaking with his European counterparts. It is important that Cyprus and its euro-area partners work to resolve the situation in a way that is responsible and fair and ensures financial stability.Update:
It is now being reported that Mr Anastasiades will tell the Eurogroup that he doesn't have enough backing in parliament to pass the bill. He needs 29 votes to pass the law through and his DISI party only has 20 seats.
Cyprus’s Democratic Party, which has eight seats in parliament and supported president Anastasiades at this year's elections will vote against the savings levy and
DIKO, with 19 seats, and Edek with 5 seats, have also indicated they will oppose the bill.
1:11 PM PT: SpiegelPeter Peter Spiegel
Word from Nicosia that they've canceled the bailout vote for tomorrow. #Cyprus
About 19 minutes ago via web Favorite Retweet Reply
1:17 PM PT: Mr Anastasiades will tell the Eurogroup that he doesn't have enough votes. His DISI party only has 20 seats and he needs 29 votes to pass the law.
Akel with 19 seats, and Edek with 5 seats, have already indicated they will oppose the bill and Cyprus’s Democratic Party, or DIKO, will vote against the savings levy, according to state-run TV station CYBC although they supported president Anastasiades at this year's elections.
1:27 PM PT: The EuroGroup has decided to give Cyprus more flexibility over the bank levy, a Greek finance ministry source has told Reuters.
The EuroGroup has agreed that depositors with less than €100,000 should be protected, the official said.
1:42 PM PT: The EuroGroup has released an official statement. It recommends that Cyprus eases terms on small depositors, reaffirms the importance of deposit guarantees under €100,000, maintains that Cyprus must stick to the €5.8bn goal and asserts that the deposit levy is "one off" measure.
2:07 PM PT: Anton Siluanov, the Russian finance minister, said the decision to reconsider easing terms of a €2.5bn loan to Cyprus that has kept the government afloat for the last two years. Brussels and Nicosia had been in talks with Moscow to extend the loan's repayment schedule and lower its interest rate.