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Cyprus will try to amend bailout plan

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By The Associated Press
Sunday, March 17, 2013, 7:36 p.m.
 

NICOSIA, Cyprus — Cyprus' president said on Sunday that he is trying to amend an unpopular eurozone bailout plan that would tax deposits in the country's banks to reduce its effect on small savers.

But in a nationally televised speech, President Nicos Anastasiades also urged lawmakers to approve the tax in a vote on Monday, saying it is essential to save the country from bankruptcy. About 25 lawmakers in the 56-seat Cypriot parliament said they wouldn't vote for the tax amid deep resentment over a move some called disastrous.

Monday is a national holiday in Cyprus.

“I completely share the unpleasant sentiment that this difficult and onerous decision has caused,” Anastasiades said. “That's why I continue to give battle so that the decisions of the eurozone are amended in the next hours to limit the effect on small depositors.”

In exchange for $13 billion in rescue money, creditors would impose a one-time tax of 6.75 percent on all bank deposits under (euro) 100,000 ($131,000) and 9.9 percent over that amount. The decision on Saturday prompted anxious depositors to rush to ATM machines to withdraw as much of their money as they could.

Anastasiades did not say what he meant by “small depositors,” but they would certainly fall among those with less than (euro) 100,000 in the bank.

The deposit tax is part of a bailout agreement reached early Saturday after talks by finance ministers from euro countries and representatives of the International Monetary Fund and the European Central Bank.

The Cypriot bailout follows those for Greece, Portugal, Ireland and the Spanish banking sector, and it is the first one that dips into people's savings to finance a bailout. Analysts worry the move could roil international markets and jeopardize Europe's fragile economies.

Officials in Spain and Italy tried over the weekend to reassure their citizens by saying the situation in Cyprus is unique, and that bank deposits in their countries will remain safe.

In Cyprus, the levy — which also would hit wealthy Russian depositors who have put vast sums into Cyprus' banks in recent years — is expected to raise (euro) 5.8 billion to recapitalize the nation's banks and service the country's debt.

Cypriot banks got into trouble after losing about (euro) 4.5 billion on their Greek government bond holdings after eurozone leaders decided to write down Greece's debt last year.

Anastasiades provided no specifics on what he would do to try to limit the pain on small depositors. Anastasiades, president since March 1, had rejected going after deposits to help pay for a bailout during the campaign and after his election.

 

 
 


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