Cyprus postpones bank bailout debate

Written By Unknown on Minggu, 17 Maret 2013 | 19.15

17 March 2013 Last updated at 07:27 ET

Cyprus's parliament has postponed an emergency session on a controversial bailout deal for the country's banks.

The debate and a presidential address were to happen on Sunday but will now take place on Monday, state media said.

The deal reached with the EU and IMF on Friday has provoked public anger because it would impose a levy on bank deposits of up to 10%.

The president has said that refusing the bailout would lead to the collapse of the country's banks.

Worried investors have been queuing outside banks to withdraw their savings from cash machines.

The 10bn-euro ($13bn; £8.6bn) deal agreed by the EU and IMF marks a radical departure from previous international aid packages.

Under its terms, people in Cyprus with less than 100,000 euros in their accounts would have to pay a one-time tax of 6.75%.

Those with sums over that threshold would pay 9.9% in tax.

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Bailout levy

  • 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

Depositors will be compensated with the equivalent amount in shares in their banks.

'Betrayal'

On Saturday President Nicos Anastasiades admitted the deal was "painful" but said it was necessary to avoid a "disorderly bankruptcy".

But opposition leaders and savers - including many non-Cypriots - have expressed shock and anger at the proposal.

The deal requires the approval of parliament.

President Anastasiades's Democratic Rally party - which has 20 seats in the 56-member assembly - needs support from other factions to ratify the bailout.

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"Start Quote

The EU has a poor record in predicting the consequences of its bailouts. Time and again it has under-estimated the impact of austerity. Even though the Cypriot economy is tiny - what will be the impact of this on its GDP? How will the bailout loan be re-paid, or will Cyprus - like Greece, Spain and Portugal - end up facing years of hardship? "

End Quote

The president has been meeting with members of the parliament's finance committee, his office said.

On Saturday the head of the committee, Nicholas Papadopoulos, expressed shock at the deal, saying it was "much worse than expected".

Opposition leader George Lillikas said the president - who was elected last month - had "betrayed the people's vote".

The deal has caused anger within the European Parliament.

Sharon Bowles, who chairs its Economic and Monetary Affairs Committee, said: "This grabbing of ordinary depositors's money is billed as a tax so as to try and circumvent the EU's deposit guarantee laws. It robs smaller investors of the protection they were promised. "

Russian money targeted

If it goes ahead, the levy will affect many non-Cypriots with bank accounts, including UK expatriates.

However, depositors in the overseas arms of Cypriot banks will not be hit. Bank of Cyprus UK and Laiki Bank UK both confirmed on their websites that there would be no impact.

Chancellor George Osborne said the UK would compensate any government employees and military personnel whose bank accounts were affected.

According to Reuters news agency, almost half of the depositors in Cyprus are believed to be non-resident Russians.

The EU decision to impose a levy on bank deposits may have been motivated by a belief that a lot of the money in Cypriot banks belongs to Russian money-launderers, BBC business editor Robert Peston says.

The levy itself would not take effect until Tuesday, following a public holiday, but action is being taken to control electronic money transfers over the weekend.

Co-operative banks, the only ones which were open in Cyprus on Saturday, closed after people started queuing to withdraw their money.


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