Cyprus lawmakers narrowly reject bailout legislation outside parliament

NICOSIA, Cyprus – Cypriot lawmakers on Tuesday scrambled to put the country’s bailout deal back on track after Parliament narrowly rejected two pieces of legislation that international creditors demanded in return for a second 1.5 billion euro ($1.98 billion) installment from a 10 billion euro loan.

Lawmakers voted 21 in favour and 23 against legislation pertaining to the supervision and reform of the country’s troubled co-operative and commercial banks. The two bills were part of a larger package of bailout measures that lawmakers were voting on ahead of a meeting of euro area leaders next week when it’s expected that the installment will receive the green light.

The unexpected outcome of the vote sowed confusion within Parliament, prompting speculation that Cyprus’ 23 billion euro ($30.36 billion) financial rescue deal that it negotiated with its euro area partners and the International Monetary Fund in March would be put into jeopardy.

Government spokesman Christos Stylianides told the Associated Press that party leaders had reached agreement during an emergency meeting with Finance Minister Harris Georgiades to again put the legislation to a vote for approval.

As part of its rescue, Cyprus in March agreed on a deal that saw deposits over 100,000 euros in its two biggest banks take major losses. Restrictions on withdrawals and transfers from banks were also imposed to prevent a run.

The legislation is a prerequisite for international creditors to release the next installment which will be used to restore co-operative banks’ depleted capital buffers.

The country’s ruling, centre-right DISY party and its partner DIKO voted in favour while communist-rooted party AKEL socialist EDEK voted against. Also voting against was the lone Green Party lawmaker as well as two other lawmakers.

Meanwhile, several hundred protesters gathered outside the parliament earlier Tuesday to denounce the legislation they say will only fan poverty.

Demonstrators from AKEL and other left-wing groups shouted slogans and held aloft banners criticizing the country’s financial rescue plan. One banner read “We won’t become 21st -century slaves.”

Cyprus’ creditors have said that the country is making good progress in meeting its bailout conditions, but warned authorities to remain vigilant in sticking to the terms of the agreement amid high uncertainty over the country’s economic outlook.