Bailout deal sparks anger in Cyprus

Cypriots headed to local cooperative banks and ATMs on Saturday in an effort to protect their savings from a new tax.

Izvor: Deutsche Welle

Saturday, 16.03.2013.

15:55

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NICOSIA Cypriots headed to local cooperative banks and ATMs on Saturday in an effort to protect their savings from a new tax. The deal, agreed to as part of an international bailout, was brokered early Saturday morning. Bailout deal sparks anger in Cyprus Eurozone lenders have agreed to give Cyprus a rescue package worth at least EUR 10bn becoming the fourth country to receive a sovereign bailout. However, in exchange for the rescue fund, Cyprus agreed to levy a one time tax of 9.9 percent on deposits of over EUR 100,000 held in the country's banks. A tax of 6.7 percent will be applied to anything under EUR 100,000. The levy is expected to generate EUR 5.8bn. The cooperative banks, which represent about a fifth of the island's banking sector, remained open only for about an hour before shutting down to prevent a run on withdrawals. However, people continued to have access to funds through ATMs. The levy must be ratified by parliament before banks open on Tuesday, as Monday is a public holiday. "The assistance is warranted to safeguard financial stability in Cyprus and the eurozone as a whole," Eurogroup President Jeroen Dijsselbloem told reporters after the meeting early Saturday. Cyprus' GDP makes up less than 0.2 percent of the eurozone's overall output. The bailout fund gives Cyprus less than it had originally requested. In mid-2012, the eurozone country asked for international aid of at least EUR 17.5bn, the majority of which would go towards rescuing its ailing banks, which were affected by the sovereign debt restructuring in neighboring Greece last year. However, because the loan would have amounted to nearly the size of Cyprus' entire economy, creditors lowered the number to a more manageable amount of debt. A fresh round of talks began earlier this month after presidential elections had stalled the negotiation process. The government in Nicosia had been pressing for a solution after announcing that its financial resources would run out in May. Cypriot Finance Minister Michael Sarris is scheduled to travel to Moscow on Monday to renegotiate the terms of a EUR 2.5bn loan from Russia, which he would like to push back five years to 2021. Deutsche Welle

Bailout deal sparks anger in Cyprus

Eurozone lenders have agreed to give Cyprus a rescue package worth at least EUR 10bn becoming the fourth country to receive a sovereign bailout.

However, in exchange for the rescue fund, Cyprus agreed to levy a one time tax of 9.9 percent on deposits of over EUR 100,000 held in the country's banks. A tax of 6.7 percent will be applied to anything under EUR 100,000. The levy is expected to generate EUR 5.8bn.

The cooperative banks, which represent about a fifth of the island's banking sector, remained open only for about an hour before shutting down to prevent a run on withdrawals. However, people continued to have access to funds through ATMs.

The levy must be ratified by parliament before banks open on Tuesday, as Monday is a public holiday.

"The assistance is warranted to safeguard financial stability in Cyprus and the eurozone as a whole," Eurogroup President Jeroen Dijsselbloem told reporters after the meeting early Saturday. Cyprus' GDP makes up less than 0.2 percent of the eurozone's overall output.

The bailout fund gives Cyprus less than it had originally requested. In mid-2012, the eurozone country asked for international aid of at least EUR 17.5bn, the majority of which would go towards rescuing its ailing banks, which were affected by the sovereign debt restructuring in neighboring Greece last year.

However, because the loan would have amounted to nearly the size of Cyprus' entire economy, creditors lowered the number to a more manageable amount of debt.

A fresh round of talks began earlier this month after presidential elections had stalled the negotiation process. The government in Nicosia had been pressing for a solution after announcing that its financial resources would run out in May.

Cypriot Finance Minister Michael Sarris is scheduled to travel to Moscow on Monday to renegotiate the terms of a EUR 2.5bn loan from Russia, which he would like to push back five years to 2021.

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