The Cyprus parliament has rejected the plan to impose a tax on bank deposits, leaving the country’s bailout plan in doubt.
EU countries said before the vote that they would withhold 10bn ($13bn) in bailout loans unless depositors in Cyprus shared the cost of the rescue, and the European Central Bank has threatened to end emergency lending assistance for teetering Cypriot banks.
Subsequently to the rejection of the bill, Cyprus has ordered its banks to remain closed until next week to prevent panic withdrawals.
The cash-strapped lenders have been closed since Saturday, when Cyprus said it would raid bank deposits to help fund its international bailout package, to avoid a bank run.
Cypriot officials said they are looking for alternative ways to scrounge up the 5.8bn that the country’s euro area partners and the IMF expect in order to loan another 10bn.
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The money is needed to shore up the ailing banks and government finances.
The newly elected president, Nicos Anastasiades, who said this week a rejection of the bailout deal would mean "indescribable misery" for Cyprus, was meeting party leaders to explore a potential plan B.