Cyprus Agrees To 20% Tax On Big Savers In Order To Secure European Bailout

on March 23 2013 3:36 PM
  • Cyprus protest
    Cypriot bank employees march on the Parliament in Nicosia on Saturday as it considers emergency measures to rescue the economy. Reuters
  • Golden Dawn rally in Athens Greece
    Members of Greece's fascist Golden Dawn party protest the bailout terms imposed on Cyprus outside the German Embassy in Athens Friday night, March 22, 2013. Reuters
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Cyprus' government agreed Saturday to a new levy on the country's savers in order to secure a European bailout, according to Sky News. The measures include a 20 percent tax on savers with deposits over €100,000 ($130,000) at the country's largest bank, the Bank of Cyprus, which would see some individuals lose a fifth of their money. A 4 percent tax on deposits over €100,000 will be levied at other banks.

Officials held talks throughout Saturday at the Finance Ministry with lenders from the European Union, European Central Bank and International Monetary Fund -- the "Troika" -- as angry demonstrators outside chanted "resign, resign!"

Further talks are scheduled for Sunday evening in Brussels, which will take the crisis down to the wire.

"Hopefully by tomorrow in Brussels we will have the agreement of our partners," Averof Neophytou, deputy leader of the ruling Democratic Rally party, told reporters.

The ECB warned that unless Cyprus came up with €5.8 billion by Monday it would cut off the emergency cash supply that is the only thing keeping the country's banks solvent.

Cyprus voted Friday to raise the 5.8 billion euros from Cypriot bank customers in exchange for a €10 billion EU lifeline to keep the country's economy afloat. Ordinary Cypriots were outraged by the original proposal, and have been withdrawing cash from ATMs ever since bank doors closed across the country.

Cypriot lawmakers voted in late-night session on Friday to nationalize state pensions and split failing lenders into "good" and "bad" banks - a measure likely to be applied to No. 2 lender Cyprus Popular Bank, also known as Laiki. They also gave the government powers to impose capital controls, anticipating a run on banks when they reopen on Tuesday.

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