Eurozone ministers urge Cyprus to shield small savers

 

Cypriots say they have been betrayed by Europe

Finance ministers from the eurozone have asked Cyprus to reduce the burden on small investors from a proposed levy on savings, linked to a bailout.

Plans for a one-off tax of 6.75% on savings up to 100,000 euros (£86,000; $130,000) have outraged Cypriots.

Banks in Cyprus are to remain closed until Thursday, as efforts to revise an international bailout package continue.

A parliamentary vote on the package has been repeatedly postponed, but is now expected on Tuesday.

The 10bn-euro bailout agreed with the EU and IMF demands that all bank customers pay a one-off levy.

Start Quote

Parliament is called to legalise a decision to rob depositors blind, against every written and unwritten law. We refuse to subscribe to this”

End Quote Yiannakis Omirou Cyprus parliament speaker and leader of EDEK party

The government's efforts to shift more of the burden onto wealthier depositors enraged Russians, who form the bulk of overseas investors and have deposits worth billions of dollars in Cypriot banks.

Russian President Vladimir Putin called the proposed levy "unfair, unprofessional and dangerous", and Moscow has expressed frustration Russia was not included in European decision-making on Cyprus.

Threat to confidence

Under the currently agreed terms of the levy, depositors with less than 100,000 euros in Cyprus accounts would pay a one-off tax of 6.75%, while those with sums over that threshold would pay 9.9%.

But the move has outraged Cypriots and sparked heavy cash withdrawals from banks.

Since the start of the financial crisis there has been a guarantee that deposits under 100,000 euros in banks in the EU would be protected.

Many observers believe the Cypriot levy breaks the spirit of that agreement, and there is concern that it could also damage the confidence of depositors in other eurozone countries, reports the BBC's Chris Morris in Brussels.

Analysis

Cypriots will tell you they're a resilient nation. They bounced back from the war of 1974 and became a prosperous EU member three decades later.

But even they are feeling defeated by this shock tax. "Daylight robbery" is what many here call it.

"If Brussels insists on this, we should leave the EU altogether," one elderly gentleman told me in a Nicosia cafe.

And that is perhaps the lasting damage of this affair - a tiny yet proud EU member now feels bullied and blackmailed by the powerful, the old north-south division of Europe widening again.

Yet many argue Cyprus sleepwalked into this mess. For years it thrived as a tax haven, its banking sector eight times the size of its economy. The warning signs were there but few were willing to heed them.

Eurozone finance ministers - the Eurogroup - discussed the situation in a conference call on Monday evening.

Following the talks, its president Jeroen Dijsselbloem issued a statement saying the group "continues to be of the view that small depositors should be treated differently from large depositors and reaffirms the importance of fully guaranteeing deposits below 100,000 euros".

He said Cyprus would "introduce more progressivity in the one-off levy" - in other words, shift the burden away from small savers towards bigger depositors - provided that the same amount of funds, 5.8bn euros, was raised.

Mr Dijsselbloem urged "a swift decision by the Cypriot authorities and parliament to rapidly implement the agreed measures".

Vote 'close'

President Anastasiades has been holding talks with ministers and MPs at the parliament building in Nicosia, where hundreds of people noisily protested on Monday.

The BBC's Mark Lowen in Nicosia says there are suggestions Mr Anastasiades may want to lower the former rate to 3%, while raising the levy on the larger depositors to 12.5%.

The debate and vote in Cyprus' parliament is now scheduled for 18:00 local time (16:00 GMT) on Tuesday. It was to have been held on Sunday.

Levy graphic
  • Depositors with under 100,000 euros deposited must pay 6.75%
  • Those with more than 100,000 in their accounts must pay 9.9%
  • Depositors will be compensated with the equivalent amount in shares in their banks
  • The levy is a one-off measure

The president's Democratic Rally has 20 seats in the 56-member assembly and needs other parties' support to ratify the deal.

The vote remains too close to call, correspondents say.

Speaker Yiannakis Omirou, of the EDEK party, said: "Parliament is called to legalise a decision to rob depositors blind, against every written and unwritten law. We refuse to subscribe to this."

Mr Anastasiades insists that without the bailout Cyprus could face bankruptcy and a possible exit from the eurozone - a fear echoed by European officials.

The US has called for a "responsible and fair" resolution.

Protesters in Cyprus have held up banners blaming Germany for the controversial bailout deal, but Germany says it always favoured protecting bank accounts with up to 100,000 euros, and insists it was the Cypriot government, European Commission and ECB that decided on the levy terms.

Earlier European Commission spokesman Simon O'Connor defended the group's actions, saying its original decision on the bailout was "taken by unanimity, all the member states of the eurozone, including Cyprus".

Stock markets in the US, Asia and Europe fell in early trading, though some of their losses were recouped later in the day. The euro also fell.

Cyprus may only be a tiny fraction of the eurozone economy, our Brussels correspondent says. But the sense of uncertainty surrounding it is sending shivers through the financial markets.

Highcharts graph
 

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  • rate this
    +1

    Comment number 84.

    EU finance minsteres have called on Cyprus, to reject a key tennant of an EU organised bailout.

    In other news

    This morning the left hand found out that the right hand was doing stuff it didn't know about.

  • rate this
    +2

    Comment number 83.

    This is just typical of International capitalism and the workings of International Bankers. In my opinion, the blame for the financial crisis rests on the greed of the lage banking corporations and financial systems like the IMF, the World Bank and the Central Banks. They need to pay for the financial chaos they have caused. Rather tax the executives of these institutions not the investors.

  • rate this
    0

    Comment number 82.

    This is pure populism and socialist demagougery, what about the people whose deposits are larger than the arbitrary figure? According to the EU hypocrites, they are fair game, just because they worked harder, saved more and were more successful then the rest, and they deserve to be the victims of this blatant state theft? And after this open and unabashed robbery, who would trust any EU banks?

  • rate this
    +3

    Comment number 81.

    Every saver and investor in the EU is monitoring this situation. That includes EU citizens with savings and companies investing in Europe from outside of the Eurozone.

    This is the very worst solution to Cyprus' problems because people will start to doubt whether any money is safe in any bank in the EU. Cyprus today, who next?

    Whoever suggested this 'solution' is an idiot.

  • rate this
    +2

    Comment number 80.

    What about those accounts in the red - does this mad, mad government give them a bonus.

  • rate this
    +2

    Comment number 79.

    This is just another reason why we need to get out of the EU, you are not safe with these corrupt unelected politicians.

    People on here are blaming the Russian money launderers.

    Take a look at our football premiership if you want to see money launderers, Russian and otherwise, all sanctioned by our banks and government.

    If most of our resident oligarcs went home they would be imprisoned.

  • rate this
    -1

    Comment number 78.

    This is totally amoral. Calling this theft a tax doesn't disguise the despicable act it is. The Eurozone deserves the runs on all their banks they have just caused and the concomitant bankruptcy.
    Playing fast and loose with innocent savers' money like this is disgusting and destroys any little faith that anyone would have had in the "turd" that is the international banking system.

  • rate this
    +4

    Comment number 77.

    Entirely agree with gsum #37. The Brussels bureaucrats together with the Frenchwoman at IMF are idiots! They can no longer be trusted by anyone in Europe. The banks are spineless self-serving bonus-grabbing thieves in cahoots with politicians. Throw them all out! Most of all UK voters: wake up and exit EU asap. Don't renegotiate, QUIT whilst you still have some money in your untrustworthy banks!

  • rate this
    +2

    Comment number 76.

    47. Bruce Tuxford
    1 MINUTE AGO
    "Ponder on this."
    Except in Cyprus they were getting interest rates of 6% tax free so a tax of 6.75 barely takes one yrs interest. So over 10 years a Cypriot account holder would be much much better off than a UK saver with our rates and taxed interest over the same period.
    So maybe just back date Cypriot interest rates to UK levels and reclaim the excess interest

  • rate this
    +1

    Comment number 75.

    Maybe its not just the Russian Mafia that is adapt at criminality. Still live in the UK and steal from a shop and face prosecution but steal from the Country and get a bonus. You could not make this up.

  • rate this
    +1

    Comment number 74.

    If I was subject to the scheme and the shares were worth the money I really wouldn't give a monkey's.

    It would only be an issue if I had plans to spend all the money on say a house and needed every penny.

    If the shares are worth less than the price they are issued at then I would complain.

    That said I don't live in Cyprus and no one there cares what I think.

  • rate this
    0

    Comment number 73.

    Cypriots have nothing more to lose, they've been well and truly screwed by their own politicians, the ECB and the IMF. Their banks are going to fail anyway so they should withdraw what they can,
    when they can and precipitate a run on other vulnerable European banks. If this brings the whole stinking and corrupt European banking system down with them, their sacrifice will not have been in vain!

  • rate this
    +3

    Comment number 72.

    There are Russian funds all over the world and focusing on Cyprus is a cheap gimmic. Abramovic for example.... or is that Ok all of a sudden?
    Germany was bailed out after creating death and devastation and they accepted that money happily. Euro is a failed concept and UK would be mad to ever want anything to do with it. Cyprus should default, dump the Euro and fight out of this on own terms.

  • rate this
    +2

    Comment number 71.

    This whole debacle just goes to prove how divorced from the real world politicians and their advisers are, and having seen the knock on effects already happening before the tax has been approved and levied which any regular person could have and were predicting they are suddenly all back tracking and trying to blame someone else for the problem.

  • rate this
    +2

    Comment number 70.

    Russian President Vladimir Putin called the proposed levy "unfair, unprofessional and dangerous", and Moscow has expressed frustration Russia was not included in European decision-making on Cyprus.

    Hey Putin - when you stop behaving like a tyrant / Mafia boss and more like a true leader for your people, then we'll start to listen.

  • rate this
    +1

    Comment number 69.

    Whatever happened to human rights, democracy and social justice? If they can "tax" 10% of your money in the bank, then they can "tax" 10% of the money in your wallet or "tax" 10% of the furniture in your home. How is it fair to target those who put savings in banks instead of buying houses? How can we trust such manifestly incompetent out-of-touch politicians to manage the Euro's survival?

  • rate this
    0

    Comment number 68.

    @14.5th element

    "They forget that the Global Financial Meltdown was caused by the banks and the lack of effective ministerial oversight - not the ordinary people."

    True. But the people I'd like to see under oath are the academic economists who supported the insane banking system. Was it really their honest professional opinion that it could work? Or were they just convenient shills for banks?

  • rate this
    +1

    Comment number 67.

    @42 That's a very skewed and partisan view. The parliament does have real power (witness its rejection of the budget compromise) and all key decisions have to be taken by the Council of Ministers from each member state by qualified majority or unanimity in some cases. You're really talking about the EU Commission, which does propose policies but can't enact these by themselves.

  • rate this
    +1

    Comment number 66.

    If You tolerate this, Your Children will be next

  • rate this
    +3

    Comment number 65.

    Remember it is Russia laundering money in Cyprus due to relaxed disclosure laws. just one of many secret places to hide your cash. I guess there will soon be one place less to stash your dodgy cash!

 

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