Cyprus Parliament Rejects Bailout Plan; Euro Membership in JeopardySubmitted by Michael Nystrom on Tue, 03/19/2013 - 23:48
SYDNEY (MarketWatch) — The Cypriot parliament’s rejection of a plan to bail out the country’s banking sector has opened the door a bit wider to the possibility of its exit from the currency bloc, say analysts.
Still, markets appear to be taking the rejection of the 10 billion euro ($13 billion) bailout plan — which had at its center a controversial deposit tax — in their stride at present. U.S. stocks had mostly ended mildly lower on Tuesday, and Asian stocks were split between gains and losses Wednesday.
One reason for the recent relatively sanguine market reaction, analysts say, is that there is still time for lawmakers to present a more palatable agreement to the Cypriot parliament, before bank branches reopen on Thursday after an extended holiday.
“We do not believe that the move by the Cypriot parliament should be seen as the ultimate ‘no’ vote to the bailout; banks in Cyprus are closed until Thursday and we expect a new deal to emerge over the next 24 hours,” said Vassili Serebriakov, currency strategist at BNP Paribas.
Details of a new proposal “remain highly uncertain at this point, although it appears that bank deposits under €100,000 (i.e. those covered by deposit insurance) will likely not be part of the contribution to the bailout,” said Serebriakov at BNP Paribas.