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Forex Flash: Cypriot Parliament vote canceled as terms are renegotiated – TD Securities

FXstreet.com (Barcelona) - The bailout to Cyprus is being object of renegotiation so smaller depositors won't suffer the announced 6.75%. “There has been talk of breaking the tax into 3-4 tiers, that could see very smaller depositors avoid any next, a tax around 3.5% for those less than €100k, and then higher rates on those above €100k and a further increase in the rate for those above €500k in deposits”, said TD Securities analyst Richard Kelly, adding that everyone would still receive some sort of equity claim on the banks to offer the prospect that, rather than a tax, this is a forced shift from a demand deposit to a longer-term investment. “Effectively, this is a maturity extension of deposits like you would with bonds”, he concluded.

Also, the Parliamentary vote scheduled for today has been cancelled, being postponed to further in the week to allow more time to come to an agreement that will have a majority support in Parliament, "which would likely see the need to keep banks closed, or at least impose larger restrictions on deposits to ensure the tax can be implemented", Kelly wrote, advancing that this is not a "precedent" and the Troika is not interested about the composition of the deposit tax as long as the headline number stays the same.

According to TD Securities analysts, the negative precedent for the rest of the Eurozone comes more from the fact that if another country needs aid, "we will likely see deposit flight faster as depositors worry this will happen to them", they wrote.

Cyprus might reduce savings levy on smaller deposits; bailout vote postponed

Eurogroup’s Saturday controversial decision to impose a one-time tax on all bank deposits in Cyprus, as a condition for granting the distressed country a 10 billion euro bailout, has been causing considerable risk aversion on the markets and a sharp fall in the euro on Monday.
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European markets down on Cyprus

The German DAX 40 (-1.10%), the French CAC 40 (-1.10%), the Italian FTSE MIB (-2.15%) and the Spanish IBEX 35 (-1.96%) are down on Monday, the same way the other European equity indexes are, as Cyprus bailout news reached investors' ears this weekend.
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