Cyprus’ president said Sunday that he is trying to amend an unpopular euro zone bailout plan that would tax deposits in the country’s banks to reduce its effect on small savers.
But in a nationally broadcasted speech, President Nicos Anastasiades also urged lawmakers to approve the tax in a vote Monday, saying it is essential to save the country from bankruptcy. Some 25 lawmakers in the 56-seat Cypriot parliament said they wouldnvote for the tax amid deep resentment over a move some called disastrous.
“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 (EURO)10 billion ($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 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’s 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 some (EURO)4.5 billion on their Greek government bond holdings after eurozone leaders decided to write down Greece’s debt last year.