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Cypriots Face Losing Up To 10 Percent Of Their Savings

posted 17 Mar 2013, 10:12 by Mpelembe Admin   [ updated 17 Mar 2013, 10:13 ]

Cypriots say cash points are empty after residents rushed to draw out their money hours after the euro zone demanded savers pay up to 10 percent of their deposits as a bailout condition.

 NICOSIACYPRUS (MARCH 17, 2013) (REUTERS) - Many Cypriots on Sunday (March 17) found cash points had been emptied the previous day after news emerged of bailout terms, which broke a previous euro zone taboo on protecting depositors in its efforts to address the regional debt crisis.

Cyprus's parliament postponed on Sunday an emergency session to discuss a levy on bank savings imposed to partially fund the international bailout needed to stave off bankruptcy.

All meetings were postponed until Monday (March 18), the Cyprus News Agencyreported. Earlier, Cypriot President Nicos Anastasiades pushed back an informal meeting of lawmakers called for Sunday morning.

Several parties in the 56-member chamber, where no party has an absolute majority, were meeting on Sunday morning to formulate positions over the bank levy. Three parties have already said they will not back the plan.

The euro zone demanded on Saturday (March 16) that savers pay up to 10 percent of deposits as a condition for the 10 billion euro (13 billion US dollars) bailout drew fury in the eastern Mediterranean island and caused some jitters elsewhere in the region.

The decision, stunned Cypriots and caused a run on cashpoints, most of which were depleted within hours. Electronic transfers were stopped.

"Usually I pick up money on Friday for the weekend. But this time I thought I would do it on Saturday. I saw people withdrawing money on Saturday and I told myself 'let's do it later' and then there was no money. All the cash points of Laiki and Co-op Bank at Kaimakli are empty," said one Nicosia resident.

"I feel like everyone else. Annoyed and angry at the situation we are facing. We have no idea what we will face tomorrow, the situation is really difficult," another Cypriot told Reuters.

"I came here to withdraw money but all withdrawals have been halted. The situation is tragic," said another resident who failed to withdraw money from the cashpoint. "It is unfair. I have a bank loan from a government organization for twelve thousand euros to support my daughter's studies. I deposited the money at the bank and now I will loose an amount that I have to pay back with interest," added another annoyed resident.

"Not good, not good because when you get the money you already have the taxes. So your economy is not good," said another Nicosia resident.

Newly elected Cypriot President Nicos Anastasiades said refusing the bailout would have led to the collapse of the island's two largest banks, badly singed by their exposure to bailed out neighbour Greece.

The tax on deposits in Cyprus, which accounts for only 0.2 percent of the euro zone's economy, is expected to raise up to 6 billion euros as a condition for the bailout, mainly needed to recapitalise banks.

Those affected will include rich Russians with deposits in Cyprus and Europeans who have retired to the island as well as Cypriots themselves.

The size of foreign deposits in Cyprus - estimated at 37 percent of the total - was one reason the euro zone agreed to the tax on savings, to take effect when banks reopen on Tuesday. Cyprus stopped electronic transfers over the weekend.

In Spain, one of four other states getting euro zone help and seen as a possible candidate for a sovereign rescue, officials were quick to say that Cyprus was a one-off. A Bank of Spain spokesman said there had been no sign of deposit flight.

Two Cypriot banks in Britain told savers their money was safe.

Cyprus's parliament was due to convene in an emergency session to discuss the proposed penalties on deposits: 9.9 percent for those exceeding 100,000 euros and 6.7 percent on anything below that.

The choice facing Cyprus was between "the catastrophic scenario of disorderly bankruptcy or the scenario of a painful but controlled management of the crisis," President Anastasiades said in a written statement reproduced in the Simerinidaily's headline which read: "Messy drawback ahead of messy bankruptcy".

His right-wing Democratic Rally party, with 20 seats in the 56-member parliament, needs support from other factions for a vote to pass.

He did not say which way his party would vote on Sunday. It is already split over backing Anastasiades three weeks ago.

Cyprus's Communist party AKEL, accused of stalling on a bailout during its tenure in power until the end of February, was likely to vote against the measure. The socialist Edek party called EU demands "absurd".

Saving Cyprus's financial sector would have been impossible without the levy because of its size relative to output - more than twice the EU average, Dutch Finance Minister Jeroen Dijsselbloem said in Brussels.