Text size:

  • Small
  • Normal
  • Large
A man looks inside a closed Laiki Bank branch in the Cyprus capital, Nicosia. Cypriot banks will be closed until Thursday to prevent a further run on deposits.
A man looks inside a closed Laiki Bank branch in the Cyprus capital, Nicosia. Cypriot banks will be closed until Thursday to prevent a further run on deposits.

Cyprus MPs throw out EU bailout levy on bank savers' cash

Politicians reject even a watered-down version of plan to levy bank savings but damage to euro-zone credibility may already have been done. Michael Theodoulou reports from Nicosia

NICOSIA // Cyprus's politicians last night threw out plans for a levy on bank savings crucial to an international bailout.

They rejected even a watered-down version of the plan that would have shielded small savers from the tax.

Hundreds of protesters outside parliament cheered in jubilation and sang the national anthem when they heard the plan had been rejected.

Cyprus will now have to come up with an alternative plan to raise the money. If it does not, it will not qualify for external rescue loans, its banks face collapse and the country could go bankrupt.

The president, Nicos Anastasiades, has called an emergency meeting of political leaders for this morning to discuss what to do next.

There was outrage on the island - home to about a million people - when the plan was revealed at the weekend to seize up to 10 per cent of savings in bank accounts as a condition of a €15.8 billion (Dh75bn) EU and IMF bailout.

To ease the burden on small savers, the government scrambled to tilt the tax towards those with deposits of more than €100,000. Savers with less than €20,000 would have been exempt from the levy.

Mr Anastasiades feared a higher levy on big deposits could drive away cherished Russian investors. About a third of the nearly €70bn deposits in Cyprus's outsized banking sector are believed to be held by Russians, who value the island as a friendly, low-tax place to do business.

Jittery Russian millionaires have flown to Cyprus in private jets in recent days for emergency consultations with their accountants.

Banks in Cyprus have been closed until Thursday to prevent a run on deposits and security staff will patrol branches when they reopen to control possible crowds of angry customers.

British officials said yesterday a Royal Air Force plane carrying €1 million in cash was sent to Cyprus to provide contingency funds for possible use by British military personnel and their families, in case ATMs and debit cards stop working. Cyprus's economy has been in turmoil since the harsh terms of the bank bailout were announced several days ago.

Elias Chiotellis, 38, a Cypriot engineer who has worked in Qatar for the past two years, planned to save enough money to buy a flat in Nicosia and return home to his family and girlfriend.

On Saturday, while in Cyprus for a holiday, he woke up to discover he could be losing €10,000 overnight.

"I'll have to cut down on expenses and put off the time when I can come home to Cyprus," he said dejectedly. "But I consider myself lucky at least to have a job in Qatar."

Many other Cypriots, who have a strong education ethic, feel bitter that savings they had put aside for their children's and grandchildren's futures could be raided.

"I'd scrimped and saved every penny for my son's education," said Argyro Toumazou, an unemployed cultural affairs consultant. "My husband is an actor who recently had a 10 per cent salary cut and was already on a low wage.

"It's been a very difficult winter - we couldn't even afford to put on the central heating."

Before last night's vote about 300 Cypriots protested outside parliament, which was cordoned off by police.

"If they vote for this tax they will face the fury of the people," said Markos Economou, a 47-year-old physics teacher and father of two at a similar protest on Monday. "The banks and the politicians should pay for this mess, not the people".

Many ordinary Cypriots blamed European leaders, especially the German chancellor, Angela Merkel, for the debacle. A hapless German television crew trying to interview Cypriots queuing up at a bank machine in central Nicosia was given short shrift.

"We are hugely disappointed by our so-called European partners," said one protester, Andreas Evangelou, 52, adding that savings he made to put his son through university would be taken.

Many of the 60,000 Britons who have made their home in Cyprus - 18,000 of them pensioners - were also in shock when they first heard the news about the bailout plan.

Clive Turner, 81, a retired businessman in Paphos, said: "Everyone's stunned. It's so indiscriminate. Most sensible Britons had their money in other jurisdictions, like the Channel Islands, and just brought into Cyprus what they needed to live on. But I know many people who've been caught out, like one friend who brought in a lot of money only last week to renovate his house and has now been badly hit."

Chris Drake, a former BBC correspondent retired in Limassol, said: "I'm furious with myself. I had so many opportunities to move my money abroad but was taken in by all the promises that any attempt to raid my savings was a red line not to be crossed. Experts said it was against the law. Now I've lost several thousand euros.

Even so, Mr Drake said, "I don't mind paying towards the bailout. After all it's my choice to live in Cyprus and the situation could be a lot worse if parliament rejects the deal, which would leave the country facing bankruptcy."

Sandro Dikaios, a Cypriot accountant with many foreign clients, agreed. The current bailout plan was a "disaster" that could undermine Cyprus as a financial centre, he said. "Yet we have to accept it and put our house in order to save our country."


* Additional reporting by Reuters, the Associated Press and Bloomberg News

Back to the top

More articles

Editor's Picks

 Iranian President Hassan Rouhani greeted by university students as he leaves Sistan University in Sistan and Baluchestan’s provincial capital of Zahedan on Tuesday, April 15, 2014. Maryam Rahmanian for The National

In Iran’s most troubled province, Rouhani hears pleas for change

Hassan Rounani aims to connect with residents of far-flung Sistan and Baluchestan province.

 Prince Bandar bin Sultan in Riyadh on March 3, 2007. Hassan Ammar / AFP Photo

Saudi Prince Bandar promised a victory he could not deliver

Saudi Arabia's controversial intelligence chief stepped down this week after rumours that his policies on Syria had fallen out of favour.

 Iranian President Hassan Rouhani greets supporters after his arrival in Zahedan, the regional capital of Sistan and Baluchestan province on Tuesday, April 15, 2014. During Mr Rouhani's two-day visit, he will tour several other cities and hold meetings with local scholars and entrepreneurs. Maryam Rahmanian for The National

On the road with Hassan Rouhani

Iran's president is touring some of Iran's most underdeveloped provinces. Foreign correspondent Yeganeh Salehi is traveling with him.

 Twitter photo of  Abdel Fattah El Sisi on the campaign trail on March 30. Photo courtesy-Twitter/@SisiCampaign

El Sisi rides a bicycle, kicks off social media storm

The photos and video created a huge buzz across social media networks, possibly a marker of a new era for Egypt.

 Friday is UN Mine Awareness Day and Omer Hassan, who does demining work in Iraqi Kurdistan, is doing all he can to teach people about the dangers posed by landmines. Louise Redvers for The National

A landmine nearly ended Omer’s life but he now works to end the threat of mines in Iraq

Omer Hassan does demining work in Iraqi Kurdistan and only has to show people his mangled leg to underscore the danger of mines. With the world marking UN Mine Awareness Day on Friday, his work is as important as ever as Iraq is one of the most mine-affected countries in the world.

 Turkey's Prime Minister Recep Tayyip Erdogan and Turkish spiritual leader Fethullah Gulen. AFP Photo

The inner workings of Gulen’s ‘parallel state’

Fethullah Gulen's followers are accused of trying to push Turkey's prime minister from power.


To add your event to The National listings, click here

Get the most from The National