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Cyprus in flux as support for levy hangs in the balance

FXstreet.com (Barcelona) - Earlier today, Cypriot lawmakers were poised to reject an unprecedented and landmark levy on bank deposits in a parliamentary vote, risking the potential for the rekindling of euro turmoil and raising the specter of the country’s default.

Parliament began debating the measure in Nicosia, after President Nicos Anastasiades told German Chancellor Angela Merkel in a phone call that he doesn’t have the support to pass it. Lawmakers “feel and think it isn’t just and that it’s against the interest of Cyprus,” he said in an interview today.

The Mediterranean island nation’s banks and stock exchange will remain closed at least through tomorrow as the new Cypriot president seeks backing for the €5.8B levy on bank deposits, a bid needed to secure approximately €10.0B in international aid. Finance leaders from the 17-member Eurozone urged Cyprus yesterday to spare lesser accounts and deposits from the fiscal leeching, as they reiterated the size of their demand on account holders.

“There is no precedent for what would happen if Cyprus rejected the conditions,” Holger Schmieding, note chief economist at Berenberg Bank in London. “Our best guess is that Europe would give Cyprus a brief and final chance to rethink and vote again.”

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