Post date: Mar 20, 2013 12:34:6 AM
The Cypriot parliament's rejection of a tax on bank deposits as a condition for an international bailout is the 'worst-case scenario', a senior economist says.
BRUSSELS, BELGIUM (MARCH 19, 2013) (REUTERS) - The decision by the Cyrpiot parliament to reject a tax on bank deposits as a condition for an international bailout is the worst-case scenario and throws open the possiblity of a default, a top economist said on Monday (March 19).
Carsten Brzeski, Senior Economist at ING Bank in Brussels told Reuters the move added uncertainty to markets shaken by the latest flare-up in the eurozone crisis and that this would depress them at the opening on Tuesday."This is the worst case scenario. This means that markets will be left in total uncertainty of what is going to happen. I think it is not the final word in the bailout for Cyprus. But now obviously we have several options, one of the options would be that Cyprus could end up in a real default," he said.
Cypriot lawmakers overwhelmingly rejected a deeply unpopular tax on bank deposits on Tuesday, throwing into doubt an international bailout for the troubled euro zone member needed to avert default and a banking collapse.
The 56-seat parliament voted by 36 votes against and 19 abstentions to bury the bill, a condition of a 10-billion-euro ($13 billion) European Union bailout for theMediterranean island. One deputy was absent.
Bzeski said the clock was now ticking and anxious markets were watching.
"I think that when European stock-markets open, they will clearly drop, because, due to the new uncertainty now created by the vote in the Cypriot parliament, whether this negative impact will last will really depend on what we are going to hear from Cyprus in the next hours in the next days. So, will the president be able to find a new compromise with the parliament, will they come back to Brussels to discuss with the Eurogroup. I think many options are open, but in the short term it is clearly negative for financial markets," he said.