Government updates MPs on 'fluid' Cyprus bailout situation

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Treasury Minister Greg Clark has said the situation in Cyprus is "fluid" as he updated MPs on the proposed bailout of the island state's banks.

In a Commons statement on 18 March 2013, Mr Clark confirmed that more than 3,000 British service personnel based in Cyprus would be compensated by the British government if the levy goes ahead.

Cyprus' parliament will vote on whether to accept or block the bailout on Tuesday.

Mr Clark also said that payments from the UK government to British pensioners in Cyprus would be put on hold until least tomorrow.

"This allows us to take stock of developments in Cyprus," he said.

"Any UK pensioners in Cyprus can be assured their future pension payments are being held safely and normal payment service will resume when the situation in Cyprus becomes clear."

Under the terms of the bailout, which could be subject to alteration by Cyprus' parliament, depositors with less than 100,000 euros in Cyprus accounts would have to pay a one-time tax of 6.75%. Those with sums over that threshold would pay 9.9%.

Labour Treasury spokesman Chris Leslie said developments in Cyprus risked further undermining confidence in Europe's banking system.

He said: "The terms of this bailout are extremely concerning and the market reaction today may only be the beginning of the fallout flowing as a result.

"While it is, of course, important their banks are put on a secure footing, it is extremely dangerous for wider economic confidence if the fundamental trust of retail depositors is undermined in this way."

Replying, Mr Clark said: "It would be unwise to assume the information that has come out over the weekend will necessarily represent the shape of things to come."

But chairman of the Treasury Select Committee Andrew Tyrie said: "This is very poorly thought-through and possibly dangerously so, not least because it risks triggering a run on the banks of other indebted countries."

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