ECB's Nowotny: Cypriot Parliament's Rejection of Bank-Deposit Levy Poses a Problem for the Nation

    By Nicole Lundeen

    VIENNA--The vote by the Cypriot parliament against a controversial bank-deposit levy won't have a large effect on the euro zone but will affect Cyprus, a member of the European Central Bank's governing council said late Tuesday.

    "For Cyprus it will, of course, a significant problem," said Ewald Nowotny, who is also Austria's finance minister.

    Mr. Nowotny's comments came after the Cypriot parliament rejected a bank-deposit levy, part of an international 10 billion euro ($12.9 billion) rescue package for the country.

    After a two-hour debate on the divisive tax, 19 lawmakers abstained from the vote. The remaining lawmakers present in Cyprus's 56-seat parliament voted against the plan.

    When Cyprus doesn't contribute its EUR5.8 billion share of the bailout package, "I would assume that also the previous promises are invalid. That means we are quasi by point zero," he said.

    It "was probably not politically very clever" to involve small depositors, he said.

    Mr. Nowotny said there had been a discussion before whether Cyprus was even systemically relevant and needed to be bailed out. Cyprus's economy makes up 0.2% of the euro zone's economy, he said.

    When asked about the possibility of a euro-zone exit for Cyprus, Mr. Nowotny said, "Certainly this is not [desired] from the side of the euro zone ... but one must say that membership in the euro zone demands a certain discipline, a certain readiness for rational action."

    The official repeated earlier comments that Cyprus is a special case that hasn't implemented the reforms that other countries have.

    Mr. Nowotny was speaking on the evening news program ZiB2 on Austrian state television ORF.

    Write to Nicole Lundeen at

    "ECB's Nowotny: Cypriot Parliament's Rejection of Bank-Deposit Levy Poses a Problem for the Nation," published Tuesday at 2148 GMT, misstated Ewald Nowotny's title in the second paragraph. Mr. Nowotny is Austria's central bank governor.