Cyprus shellshocked as savings tax imposed for EU bailout
The message is clear to Europans savers, get your money out of the banks now but for most in cyprus its already to late as all outgoing accounts are frozen before EU steals millions from Cypriot savers ,
Cash machines EMPTIED across Cyprus as 60,000 British savers face losing MILLIONS after £8.7billion EU bailout imposes tax on all of nation’s bank accounts
- Lines formed at ATMs as people scrambled to pull their money out
- Word spread that rescue package included a one-off levy on deposits
- Restrictions stopping people emptying accounts or moving money abroad
- Up to 3,000 British service personnel are based on the bankrupt island
- President Nicos Anastasiades agreed to raid with European finance chiefs
- Said country in ‘state of emergency’ and not acting would be ‘catastrophic’
- But expats accused the island of ‘plain theft’ as violent protests sparked
- Britons have around £1.7b of deposits on island and could lose up to £170m
EU steals 10% from savers to bailout Cyprus’ bankers (16Mar13)
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Those with greater sums will lose 9.9%.
Depositors will be compensated with the equivalent amount in shares in their banks.
Reports suggest that depositors will be able to access all of their money except the amount set by the levy.
Co-operative banks, the only ones open in Cyprus on Saturday, closed after people started queuing to withdraw their money.
At one bank in the Limassol district, a frustrated man parked his bulldozer outside and threatened to break in.
Angry customers outside Banks shouted
“This is robbery and we must get the EU to stop this”
Alan, a British expatriate saver in CyprusSpeaking to BBC News
The levy itself will not take effect until Tuesday, following a public holiday, but action is being taken to control electronic money transfers over the weekend.
People in Cyprus with less than 100,000 euros in their accounts will have to pay a one-time tax of 6.75%, Eurozone officials said.
once news of what was happening got around PEOPLE panicked rushing to cash machines.
Savers in Cyprus banks reacted with shock on Saturday after the government agreed to an unprecedented levy on all deposits in return for a desperately needed 10-billion-euro ($13 billion) EU bailout.
CYPRUS froze all bank payments this weekend after agreeing a bailout from Brussels that could cost British savers on the Mediterranean island up to £170m.
Tens of thousands of Britons live in Cyprus, including many retirees who have taken advantage of lucrative tax breaks.
Queues formed at cash machines yesterday after news broke of the imminent tax. Electronic transfers were blocked and cash withdrawals were capped at €400, local news services said.
The debt rescue package, agreed with the eurozone and International Monetary Fund early in the morning after around 10 hours of talks in Brussels, is significantly less than the 17 billion euros Cyprus had initially sought.
Most of the balance is to be made up through the bank deposit levy of up to 9.9 percent, which will apply to everyone from pensioners to Russian oligarchs and tens of thousands of British expats, and is hoped to raise 5.8 billion euros.
The government had held out against the unprecedented EU bailout condition until the 11th hour, arguing that it would risk a run not only on the island’s own banks but also on those of other debt-ridden eurozone economies.
Although the deal was reached too late for Cyprus newspapers, the government U-turn prompted a flood of angry comments on the Internet, and some savers queued up at ATM machines in a desperate bid to withdraw their savings.
In second city Limassol, one furious would-be customer reportedly parked his digger outside a branch of the Cooperative bank, claiming the government had “tricked” him into believing deposits were safe.
But analyst Sony Kapoor warned it was too late for savers to protect their savings from the tax, tweeting: “Dear Cyprus bank depositors, the time to line outside ur banks was last week, no point now.”
Government spokesman Christos Stylianides tried to calm public anger, saying: “The situation is serious but not tragic, there is no reason to panic.
“The Cyprus government had to decide between saving the economy and a disorderly default,” he told the official CNA news agency.
The levy will see deposits of more than 100,000 euros hit with a 9.9 percent charge when lenders reopen their doors after a scheduled public holiday on Monday. Under that threshold and the levy drops to 6.75 percent.
At the same time, an additional “withholding tax” will be imposed on interest on bank deposits, and Cyprus will have to hike corporate tax to 12.5 percent from 10 percent and sell off state assets so as to help balance the public finances.
“This is like stealing, I feel rage,” a Nicosia artist who gave his name only as Kyriakos told AFP.
“I earned this money and now it is taken to cover for some mistakes that are not my fault.”
The vice president of the Cyprus Institute of Certified Public Accountants, Marios Skandalis, warned: “There is a very high risk that this could be the end of Cyprus as a strong and reliable financial centre.”
Ministers were in a race against the clock to thrash out draft legislation ratifying the bailout and push it through parliament before the banks reopen on Tuesday.
MPs are likely to convene on Sunday for the emergency debate, Antonis Koutalianos of the speaker’s office told AFP.
Centre-right MP Nicolas Papadopoulos, the son of a former president, told state radio the agreement was a “disaster” for the Cyprus banking system, which is nearly eight times the size of the island’s economy.
“Before, I thought any decision would be bad for Cyprus but this is a nightmare,” Papadopoulos said.
Cyprus — which accounts for just 0.2 percent of the combined eurozone economy — is the fifth country to secure a debt rescue package from its eurozone partners in the three-year debt crisis.
“It’s something that compared to other possible outcomes, is the least onerous,” Finance Minister Michalis Sarris said, adding the arrangement meant his government “avoided salary and pension cuts” for the public sector.
The planned levy raised concerns among analysts over a possible bank run in bigger eurozone economies, where fragile public finances are also under scrutiny.
Greece, whose own financial woes were the major factor in triggering the island’s banking crisis, scrambled to insulate itself from fallout over the Cyprus deal.
“Deposits in branches of Cypriot banks in Greece are strictly exempted,” the Greek finance ministry said.
Angry crowds gathered to demonstrate outside the presidential palace in the capital of Nicosia yesterday.
President Anastasiades held emergency talks with his cabinet and other party leaders last night and is expected to make a televised address today explaining the situation.
Because of tomorrow’s public holiday, he has two days to pass a law to enact the Brussels deal in time to seize the cash from bank accounts before Tuesday morning.
In a statement he said: ‘We either choose the catastrophic scenario of disorderly bankruptcy or the scenario of a painful but controlled management of the crisis.
BANK CRISES IS A HUGE FINANCIAL EARTHQUAKE
It is understood savers will be offered shares in Cyprus banks as compensation for the raid on their savings, but it is unlikely to appease those who have lost hard cash.
A spokesman for the Cypriot government said yesterday the agreement with Brussels was ‘serious but not tragic’ and said that the EU had wanted a much higher levy, but the government had fought hard against it.
He said: ‘The dilemma is whether we would have a functioning economy or total collapse on Tuesday . . . whether to give in at the 6.75 per cent mark or lose 100 per cent.’
The UK’s Ministry of Defence declined to comment, but Government sources suggested Ministers were considering whether to help the British troops affected.
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