‘Cyprus Agrees 20% Tax On Deposits Deal’

‘Cyprus Agrees 20% Tax On Deposits Deal’

  • Posted: Mar 23, 2013
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It has been announced this evening  that Cyprus agrees to a 20% tax on deposits over 100,000 euros at the Bank of Cyprus and a 4% tax at other banks, Reuters says.

Updated 20:00

Politicians in Cyprus have agreed a new one-off levy on savers in order to secure a European bailout.

The measures include a 20% tax on savers with deposits over 100,000 euros at the country’s largest bank, the Bank of Cyprus, which would see some individuals lose a fifth of their money.

A 4% tax on deposits over 100,000 euros would be levied at other banks.

Cyprus is forced to make a 5.8bn euros by Monday or they will be transfered out of the single currency.

Eurozone finance ministers are due to meet on Sunday evening to see if the number’s Cyprus has agreed with its international lenders add up.

Cypriot President Nicos Anastasiades tweeted: “We are undertaking great efforts. I hope we have a solution soon.”

The conservative leader, barely a month in the job and wrestling with Cyprus’s worst crisis since a 1974 invasion by Turkish forces split the island in two, was due to lead a delegation to Brussels, also on Sunday, to meet heads of the EU, the European Central Bank and International Monetary Fund, in a sign a deal might be near.

Government officials held talks throughout Saturday at the finance ministry with Cyprus’s ‘troika’ of lenders – the EU, ECB and IMF. Angry demonstrators outside chanted “resign, resign!”

As well as the Greece, Cyprus was hit by crisis and needs to raise the 5.8bn euros in exchange for a 10bn euro EU lifeline to keep the country’s economy afloat.

But in a vote on Tuesday, Cyprus’s 56-seat parliament rejected a levy on depositors, big and small, as “bank robbery”, and the country’s finance minister Michael Sarris spent three fruitless days in Moscow trying to win help from Russia, whose citizens have billions of euros at stake in Cypriot banks.

Rebuffed by the Kremlin, Mr Sarris said earlier on Saturday that talks with the troika were centred on a possibly levy of up to 25% on savings over and above 100,000 euros at failing Bank of Cyprus.

However, the situation remains fluid and o ther options, including a “voluntary haircut” in exchange for equity that would not require parliamentary approval, are said to still be on the table.

Ordinary Cypriots were outraged by the original proposal, and have been besieging cash machines ever since bank doors were closed last weekend on the orders of the government to avert a massive flight of capital.

Update 2 April 2013:

Savers with more than 100,000 euros in the Bank of Cyprus could lose up to 60% of their deposits, two senior officials have warned.

The Central Bank official and the Finance Ministry technocrat said sums held at the country’s largest lender will  lose 37.5% of their value after being converted into bank shares.

And the pair said the deposits could lose up to 22.5% more in value, depending on an assessment by officials who will determine the exact figure aimed at restoring the troubled bank back to health.

Both figures were speaking to the Associated Press on condition of anonymity because they are not authorised to publicly discuss the issue.

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