Saturday, December 16, 2017
News Roundup

Cyprus rejects bailout plan, raising anxiety in euro zone

Lawmakers in Cyprus on Tuesday rejected a bailout plan that would have rescued the country's banks but forced savers to chip in for the cost, throwing down a gauntlet to the rest of Europe over the financial fate of the tiny island nation.

The plan to save Cyprus's collapsing banks but to charge depositors for the service proved so controversial that not one of the 56 members of Cyprus's parliament voted for it.

The rejection leaves the fate of rescue plans up in the air, with other European leaders so far unwilling to step in to save Cyprus, where bank deposits tower over the rest of the economy.

Parliamentarians "feel and they think that it's unjust," Cypriot President Nicos Anastasiades told reporters Tuesday.

The rejection leaves Cyprus, the International Monetary Fund and the rest of Europe in a standoff familiar from previous bailout negotiations, with the country trying to navigate its local politics and possibly get a better deal for itself as the others stand firm on how much they want to commit to yet another troubled euro-zone nation.

The fate of the 17-nation currency union, meanwhile, again hangs in the balance, threatened by a country that constitutes just 0.2 percent of the zone's collective economy. Throughout the crisis, European policymakers have tried to keep any country from leaving the euro. Losing a member nation would pose uncertain risks to the world financial system and be politically embarrassing to the major powers such as Germany and France that designed the currency union.

Overall, Cyprus needs about $20 billion — an amount equal to its annual economic output and a sum that, if all borrowed, would throw the country's finances onto unsustainable footing. The IMF's internal rules do not allow the fund to make loans to the country under those circumstances. Euro-zone countries are hesitant to lend the full amount, as well.

As a consequence, the fund, the euro zone and the European Central Bank want to cap the amount of international loans to Cyprus at about $12.5 billion and leave the country to come up with the rest. The deposit tax was one alternative for raising the money. It had the advantage of grabbing $2.2 billion to $3 billion from foreigners, many of them Russian, who own more than one-third of the money on deposit in Cypriot banks.

In a sign of the severity of the situation, Britain on Tuesday dispatched a military plane loaded with a million euros to Cyprus as a contingency measure for soldiers stationed at British bases in the country, in case they can't access their savings in Cypriot banks, according to a British Defense Ministry spokesman.

Other options could exact more from local families and businesses through government spending cuts or taxes, even if they avoid the direct hit on savings accounts. Euro-zone countries could also relent and lend more, though that would be politically sticky at home.

The IMF did not have any immediate comment on the Cyprus vote. IMF managing director Christine Lagarde has endorsed the existing proposal as one that "appropriately allocates" the costs of the country's financial rescue.

The plan rejected Tuesday would have left deposits under $26,000 unscathed, foisted a one-time 6.75 percent tax on deposits between $26,000 and $129,000, and taxed deposits above that at 9.9 percent.

The latest turmoil is a potent reminder of the fragility of the financial situation in Europe, where troubles at its periphery have threatened for the past three years to spread to some of its largest economies.

Cypriots have been lining up to take cash out of automated tellers as fast as the machines can be loaded, and a Monday bank holiday was extended through the end of today to prevent a broader run on deposits.

Wealthy Russians have long flocked to Cyprus as an offshore banking haven, and many European officials suspect it is a hub for money laundering, a conclusion reached in a report by Germany's foreign intelligence service.

The plan that was rejected would have forced Cyprus to abandon its guarantees on deposits of up to $130,000, a stunning new precedent in Europe's three-year-long economic crisis. Many analysts and officials said Cyprus should have simply honored those guarantees and concentrated the burden on larger deposits. But Cyprus has been loath to imperil its status as a financial center. Cypriot Finance Minister Michalis Sarris flew to Moscow on Tuesday afternoon to talk with furious Russian leaders about the implications for their citizens' deposits.

"They needed to make a trade-off between having any future as a financial center and appearing to be fair and progressive to their own citizens," said Sony Kapoor, the managing director of Re-Define, a Brussels-based think tank. "I think they possibly made the wrong decision there. And that has poisoned the air."

Comments

High school scoreboard for Dec. 15

Friday’s scoreboardGirls soccerCountryside 7, Clearwater 0Osceola 9, Bradenton Bayshore 0Palm Harbor U. 2, Plant 1Boys soccerPalm Harbor U. 0, Plant 0Lennard 4, Armwood 1
Updated: 8 hours ago

Lottery resultsNumbers drawn after 9 p.m. are no longer available by our deadlines. For results, go to tampabay.com/lottery.Pick 2, 3, 4, 5Fri., Dec. 15, midday:01 563 0000e_SRit95765Fri., Dec. 15, evening:12 287 1492e_SRit04851Fantasy 5Fri., Dec. 15...
Updated: 8 hours ago
Gators play Nebraska, still seeking elusive volleyball title

Gators play Nebraska, still seeking elusive volleyball title

KANSAS CITY, Mo. — There is very little these days that can dampen the mood of Florida volleyball coach Mary Wise, whose Gators knocked off reigning national champion Stanford in Thursday’s NCAA semifinals and face Nebraska tonight for the title. Not...
Updated: 8 hours ago
Pinellas sheriff’s investigator fired, could face criminal charges for involvement in child custody battle

Pinellas sheriff’s investigator fired, could face criminal charges for involvement in child custody battle

LARGO — A Pinellas sheriff’s child protective investigator has been fired and could face criminal charges after an investigation found she made a child custody recommendation to a judge as a favor to a friend.Jayne Johnson, who has worked for the She...
Updated: 9 hours ago
Festivus 2017: Send us your best grievances

Festivus 2017: Send us your best grievances

Here's your chance. Tell us what annoyed you in 2017, and we'll share it with our readers.
Updated: 9 hours ago
Experts chart path for Hillsborough to grow smarter before sprawl takes over

Experts chart path for Hillsborough to grow smarter before sprawl takes over

TAMPA — Nearly 600,000 more people will live in Hillsborough County by 2040, and if elected officials and county planners don’t take bold steps now, the population boom will turn the county into the soulless sprawl of Anywhere, U.S.A.That’s the messa...
Updated: 10 hours ago

Highlights of GOP compromise bill to overhaul tax code

WASHINGTON — Republicans in Congress have blended separate tax bills passed by the House and Senate into compromise legislation that seeks to achieve a sweeping overhaul of the nation’s tax code. GOP leaders are looking toward passage of the final pa...
Updated: 10 hours ago
Tillerson retreats on offer of unconditional N. Korea talks

Tillerson retreats on offer of unconditional N. Korea talks

WASHINGTON — America’s top diplomat stepped back Friday from his offer of unconditional talks with North Korea, telling world powers that the nuclear-armed nation must earn the right to negotiate with the United States. Secretary of State Rex Tillers...
Updated: 10 hours ago
Judge signals release of ex-Trump chair Paul Manafort to Florida home under curfew and GPS monitoring

Judge signals release of ex-Trump chair Paul Manafort to Florida home under curfew and GPS monitoring

A federal judge Friday said a bail package has been put together that would release former Trump campaign chairman Paul Manafort from home confinement in his condominium in Virginia and allow him to reside at his house in Palm Beach Gardens, but unde...
Updated: 10 hours ago
Deputies: Plant City men fled in stolen car, shot dog, hid in swamp

Deputies: Plant City men fled in stolen car, shot dog, hid in swamp

DOVER — Two Plant City men who ran from deputies and shot a dog were captured after a brief pursuit Thursday, according to the Hillsborough County Sheriff’s Office.They ditched a stolen car, ran away on foot, crossed through several yards and then tr...
Updated: 11 hours ago