The Buckingham

Photo Credit: www.theworld.com

Lawmakers in Cyprus have rejected government plans to impose an unprecedented tax on bank deposits, which has thrown into doubt the 10 billion euro bailout agreed upon with the European Union on March 16.

Failures to secure the emergency loans from the EU would leave Cyprus facing a banking collapse.

The bailout, which is considered small in comparison to rescue packages for other troubled EU nations like Greece, represents more than half the size of the 18 billion euro Cyprus economy.

The proposed tax on deposits had sparked big protests outside parliament and messed with the financial markets on March 18.

Officials chose to make changes to the proposals to protect depositors who have less than 20,000 euors in their accounts, but plans to levy a tax of 6.75% on deposits of 20,000-100,000 and 9.9% on anything above 100,000 euro wasn’t approved by parliament.

Cyprus has become the fourth of 17 eurozone stars who have been granted a bailout by its EU partners and the IMF, after Greece, Ireland, and Portugal.  Spain was given EU assistance to rescue its banks, but so far has avoided asking for a full sovereign bailout.