Text size:

  • Small
  • Normal
  • Large
The controversial EU bailout announcement caused a run on Cypriot banks.
The controversial EU bailout announcement caused a run on Cypriot banks.
Cypriots protest against an EU bailout tax on bank accounts outside their parliament in Nicosia.
Cypriots protest against an EU bailout tax on bank accounts outside their parliament in Nicosia.

Cyprus scrambles to rework bank tax bailout plan

Cypriots dump excrement outside presidential palace, Russia describes plan as 'dangerous', amid fears EU bank savings bailout may prompt a run on European banks. Michael Theodoulou reports from Nicosia

NICOSIA // Furious Cypriots marched on the presidential palace last night in protest at a plan to seize up to 10 per cent of their bank savings as part of an EU bailout.

Several hundred gathered outside parliament chanting "thieves, thieves" and "people wake up, they're drinking your blood". One protester dumped sheep wool and animal excrement in front of a line of police officers guarding the entrance.

Banks have been closed since the bailout deal was announced at the weekend and customers desperate to withdraw cash have emptied ATMs. Cypriot authorities delayed a parliamentary vote on the bank levy and ordered the banks to remain shut until Thursday while it tries to modify the deal to placate savers.

But the plan has already sent shock waves across Europe as families realised the money they have in the bank may not be safe.

"The damage is done," said Louise Cooper, who heads the financial research firm CooperCity. "Europeans now know that their savings could be used to bail out banks."

Cyprus's €10 billion (Dh47bn) bailout agreed at the weekend by the EU and IMF had demanded that all bank customers pay a one-off levy of between 6.75 and 9.9 per cent, dismaying and infuriating Cypriots and ringing alarm bells abroad. It broke with previous EU practice that depositors' savings were sacrosanct.

Abroad, the worst fear is that savers in larger European countries become nervous and start withdrawing funds, although there was no immediate sign of that yesterday.

US economist Paul Krugman wrote in The New York Times: "It's as if the Europeans are holding up a neon sign, written in Greek and Italian, saying 'Time to stage a run on your banks!'"

The Cyprus government was last night working on a plan to soften the blow to smaller savers by tilting more of the burden towards those with deposits of more than €100,000 – many of them Russians who value Cyprus as a low-tax offshore base.

Reportedly, under the latest proposal, deposits of less than €20,000 euros would be exempt from a bank levy, while accounts of up to €100,000 euros would be taxed at 6.7 per cent and those above that amount would be taxed at 9.9 per cent.

Eurozone officials indicated that changes to the deal would be acceptable as long as the return of around €6bn euros is maintained.

But the bailout plan prompted an angry response from the Russian president, Vladimir Putin, who called the proposed levy "unfair, unprofessional and dangerous".

Russian corporate and individual investors in Cyprus could lose up to US$3bn, economists said.

The Cypriot president, Nicos Anastasiades, a conservative who was elected just three weeks ago, said in televised address to the nation on Sunday night that the levy on savings was an alternative to bankruptcy. It was "painful, but "will eventually stabilise the economy and lead it to is recovery".

He said Cyprus was facing its worst crisis since Turkey invaded the north of island in 1974, splitting the island to this day.

Editorials in several Cypriot newspapers said Mr Anastasiades had been "blackmailed" by the EU, which had "held a gun" to his head during bailout negotiations.

"The EU offered a 'rescue package' that is designed to destroy rather than rescue what is left of the Cyprus economy," the Cyprus Mail said.

But opposition leaders also blamed the president. He had "betrayed the people's vote" by agreeing to the deal, proclaimed George Lillikas, an independent.

Approval of the bailout plan in Cyprus's fractious 56-member parliament is far from given. No party has an absolute majority. The president's party has 20 seats in the assembly and needs other parties' support to ratify the deal. Three of these said they would not back the bailout as it stood.

A vote initially planned for Sunday was twice been rescheduled to give more time to build a consensus.

Savers who lost money would be compensated by shares in commercial banks, with equity returns guaranteed by future revenues expected from natural gas discoveries, Mr Anastasiades said. Turkey, however, disputes Cyprus's drilling rights.

But many legislators remained unconvinced. "Essentially, parliament is called to legalise a decision to rob depositors blind, against every written and unwritten law," said Yiannakis Omirou, the parliamentary speaker who heads a EDEK, a small Socialist party. "We refuse to subscribe to this."

mtheodoulou@thenational.ae, with additional reporting by Associated Press

twitter: For breaking news from the Gulf, the Middle East and around the globe follow The National World. Follow us

Back to the top

More articles

Editor's Picks

 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.

 The Doha-based Youssef Al Qaradawi speaks to the crowd as he leads Friday prayers in Tahrir Square in Cairo, Egypt in February, 2011. The outspoken pro-Muslim Brotherhood imam has been critical of the UAE’s policies toward Islamist groups, adding to friction between Qatar and other GCC states. Khalil Hamra / AP Photo

Brotherhood imam skips Doha sermon, but more needed for GCC to reconcile

That Youssef Al Qaradawi did not speak raises hopes that the spat involving Qatar and the UAE, Saudi Arabia and Bahrain might be slowly moving towards a resolution.

 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.

 An Afghan election commission worker carries a ballot box at a vote counting centre in Jalalabad on April 6. A roadside bomb hit a truck carrying full ballot boxes in northern Afghanistan, killing three people a day after the country voted for a successor to President Hamid Karzai. Eight boxes of votes were destroyed in the blast, which came as the three leading candidates voiced concerns about possible fraud. Noorullah Shirzada / AFP Photo

Two pressing questions for Afghanistan’s future president

Once in office, the next Afghan president must move fast to address important questions that will decide the immediate future of the country.

 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.

 Supporters of Turkey's ruling AKP cheer as they follow the election's results in front of the party's headquarters in Ankara on March 30. Adem Altan/ AFP Photo

Erdogan critic fears retaliation if he returns to Turkey

Emre Uslu is a staunch critic of Turkey's Prime Minister Recep Tayyip Erdogan. Now, with a mass crackdown on opposition expected, he is unsure when he can return home.


To add your event to The National listings, click here

Get the most from The National