* Parliamentary vote scheduled for 1600 GMT
* Ministers try to soften blow to small depositors
* Divisions in parliament threaten vote
By Michele Kambas and Karolina Tagaris
NICOSIA, March 19 The government of Cyprus is
hoping to push a divisive tax on bank deposits through
parliament on Tuesday in a bid to stave off a default that could
reignite the euro zone crisis.
Breaking with previous practice that depositors' savings
were inviolable, euro zone finance ministers announced over the
weekend a one-off tax on Cypriot bank accounts would be imposed
as part of a 10 billion euro ($13 billion) bailout by the
The measure infuriated ordinary Cypriots, who staged noisy
demonstrations in the capital, Nicosia.
Cypriot and euro zone officials have since sought to soften
the initially proposed levy of 6.75 percent on depositors of up
to 100,000 euros and 9.9 percent above 100,000 in order to ease
the burden on small savers and overcome lawmaker opposition.
But passing the bill in parliament is still far from
Tuesday's vote, originally planned for Sunday, has been
postponed twice already in an effort to build consensus in a
fractious parliament where no party has an absolute majority.
Three parties have said outright they will not support the tax.
The initial proposal sent the euro and stock markets down
and has infuriated ordinary Cypriots who say they are being
forced to pay the price of the country's banking crisis.
Stunned islanders emptied cash machines over the weekend and
banks are to remain shut on Tuesday and Wednesday to avoid a
bank run. Hundreds of protesters rallied outside parliament on
Monday, honking horns and holding banners saying "We are not
your guinea pigs!"
"If they vote for this tax they will face the fury of the
people," said Markos Economou, a 47-year-old physics teacher and
father of two. "The banks and the politicians should pay for
this mess, not the people."
Seeking to overcome divisions within the government's own
ranks, ministers were scrambling on Monday to ease the pain for
small savers by tilting more of the tax towards those with
deposits greater than 100,000 euros.
Euro zone finance ministers were in favour of imposing a
15.6 percent levy on deposits of above 100,000 euros to help
recapitalise Cyprus' financial sector while sparing depositors
up to that level, officials told Reuters.
The government maintains that Cyprus has no choice but to
accept the bailout with the levy on deposits, or go bankrupt.
While Brussels has emphasised that the measure is a one-off
for a country that accounts for just 0.2 percent of European
output fears have grown that savers in other, larger European
countries become nervous and start withdrawing funds.
"If you're a small depositor in Cyprus you'll tell yourself
that it would have been better to keep your money under the
carpet than in a bank," said a French bank executive who
declined to be named.
"And if you're a Greek, a Spaniard or an Italian, well,
you'll tell yourself that you might be next."