TRNC Finance Minister, Ersin Tatar said, in a press interview earlier today, that if the South Cyprus parliament rejected the rescue package offered by the Troika then it would be disastrous. He thought the economy would collapse and there would be a huge run on the banks.
He went on to say that the bank levy imposed as part of the rescue package would need to be made law. However he doubted whether that law would be passed and if it did not, then that could lead to the resignation of the new president, Anastasiades.
Tatar said that he understood the decision of Germany to stop bailing out rich Russians who had deposits in South Cyprus. This measure, as well as others, would stop those Russians and others using South Cyprus as a tax haven and money laundering centre. He pointed out that another measure that was included in the package was the raising of government withholding tax on interest earned from 10% to 20%.
The island has developed a reputation for being a hotspot for international depositors looking for a place to hide funds, and the notion that some of that wealth would be taxed has drawn support from different quarters, including at the top levels of the International Monetary Fund.
Tatar emphasized that the investments that Turkey had made in the TRNC in tourism, agriculture and the banking sector, had made the TRNC strong and was developing the economy.
Separately, the South Cyprus Parliament is still set to meet at 6pm local time, the spectre of default looms ever larger as lawmakers look set to reject the plan. Banks are closed at least until Thursday and dealing on the stock exchange is also suspended.
Stocks have fallen over 60% during the past year.