NICOSIA, Cyprus--Cypriot lawmakers are expected to narrowly
approve the island's 10 billion euro bailout deal in a
parliamentary vote expected later Tuesday, paving the way for the
country to receive its first installment of aid next month.
The deal, which will likely squeak through with only a thin one
to two seat majority in Cyprus's 56 member legislature, caps a
month and-a-half long financial crisis that rocked the island and
threatened to send the country hurtling out of the euro zone.
Under the terms of the agreement, reached earlier this month,
Cyprus has agreed to take some EUR13 billion ($17 billion) worth of
measures to cut its deficit and restructure its banking system, in
exchange for the loan from its euro-zone peers and the
International Monetary Fund.
Among the austerity measures, Cyprus has agreed on a range of
public spending cuts on everything from government travel expenses
to pension benefits, as well as higher taxes on companies and
consumers. At the same time, the government has moved to shut down
the island's second biggest bank, Cyprus Popular Bank PCL (CPB.CP),
and radically overhaul its largest, Bank of Cyprus PCL (BOCY.CP),
something that will lead to steep losses for large, uninsured
deposit holders.
The austerity measures, the overhauls in the financial sector,
and the imposition of recent capital controls--the first imposed by
a euro-zone country--are expected to push Cyprus deep into
recession this year, with the economy officially forecast to shrink
by 8.7% in 2013. Many private economists say the downturn could be
much deeper.
In remarks to journalists hours ahead of the vote, Cyprus
President Nikos Anastasiades called on Parliament to give broad
support for the deal. "An appeal: our country is passing through a
critical time that calls for a sense of national responsibility and
conduct in a manner which is consistent with the greater good."
Cyprus's main opposition party, Communist AKEL, and its junior
ally, the Socialist EDEK party, say they will vote against the
agreement. AKEL has also called for a referendum on whether the
country should even remain in the euro-zone.
But supported by two parties--Democratic Rally and the
Democratic Party--who back the government, and with the support of
one lawmaker from the pro-government European Party, the loan deal
is expected to win 29 votes in favor--versus 27 against.
Earlier Tuesday, Cyprus's Parliament began an all day debate on
the deal, pausing in mid-session to pass a handful of secondary
bills--relating to public sector wage and pension cuts and a new
property tax, among other things--implementing the agreement.
The vote on the bailout itself is expected at around 1900 GMT,
and follows ratification earlier this month by the German and Dutch
parliaments as well. Other euro-zone members are likewise expected
to approve the loan in coming weeks, while the IMF executive board
is expected to give the greenlight to its EUR1 billion portion of
the bailout in late May.
--Stelios Bouras contributed to this article.
Write to Alkman Granitsas at alkman.granitsas@dowjones.com and
Michalis Persianis at mpersianis@gmail.com
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