London shares closed lower as the 10 billion euros Cyprus bailout deal appeared headed for the rocks with MPs for the president’s own party saying they wouldn’t vote for it.
The benchmark FTSE 100 index of leading stocks ended the day down 16.60 points or 0.26 percent at 6,441.32 points.
The 20 MPs for Cyprus President Nicos Anastasiades’ Disy party decided unanimously to abstain in the vote on Tuesday evening because “it will strengthen the bargaining position of the Republic of Cyprus,” MP Nicos Tornaritis told Sigma television.
The private broadcaster said that all other parties in the Cypriot parliament would also abstain from voting for the bill.
Controversial plans to impose a stiff levy on bank savings had pushed global share prices lower on Monday and sent the euro tumbling.
An angry backlash at home and jitters that roiled markets prompted Cypriot officials to amend the plan to shield small savers, even though it might leave the country short of the 5.8 billion euros ($7.5 billion) it must raise to unlock a 10-billion-euro bailout from the EU and IMF.
“Cypriot government officials are expected to vote against a levy on bank deposits, later on today, in a move that will create some unease in the markets, while piling the pressure back on the troika to come to an agreement that suits all parties,” said analyst Craig Erlam at trading group Alpari.
He referred to the triplet of creditors that includes the EU, IMF and European Central Bank.
Analysts expect Cyprus to be given additional time to vote again on the bank levy if lawmakers reject the measure, and an effort would be made to find the extra funds needed if the version approved falls short.
London-listed banks fell again, adding to Monday’s losses as the Cyprus crisis worsened.
Barclays sank 2.76 percent to 297.50 pence, state-rescued Royal Bank of Scotland dropped 1.24 percent to 293.60 pence and Lloyds Group, also rescued by the government in 2008, eased 0.89 percent to 49.40 pence.
Mining stocks continued their weak run as Kazakhmys tumbled 6.25 percent to 473.90 pence ahead of 2012 results next week. Rio Tinto plunged 5.19 percent to 3,107 pence, Evraz shed 4.54 percent to 233.40 pence and BHP Billiton lost 3.53 percent to 1,981.50 pence.
Defence manufactor BAE Systems led the gainers, putting on 2.47 percent to 393.40 pence.
On the currency markets, sterling eased to $1.5096 at 4:50 pm from $1.5113 on Monday evening but strengthened to 1.1734 euros from 1.1646 euros the previous night.
London shares fall as Cyprus set to reject bailout
