Savers in Cyprus could face losing one-quarter of their bank deposits under new proposals being discussed by the government as ministers flew to Brussels to salvage a European bailout.
The new bank levy would only apply to people with more than €100,000 (£85,260) in their accounts, according to the finance minister, Michael Sarris, who also said that significant progress had been made in talks with European officials.
President Nicos Anastasiades travelled to Brussels to work out an alternative plan to raise funds that would allow the country to qualify for an international bailout. Cyprus must raise €5.8bn (£4.9bn) before Monday to qualify for the €10bn EU bailout it needs to prevent the collapse of its banks and a potential departure from the eurozone.
The idea of raising money through a one-off levy on bank deposits was criticised in Cyprus, Russia and elsewhere and was unanimously rejected by the Cypriot parliament earlier this week, but is being reconsidered after negotiations with Russia to find alternative finance did not achieve a result.
On Friday, the Cypriot parliament passed nine bills, including three that would see ailing banks restructured, starting with Laiki, Cyprus's second-largest bank, a "national solidarity fund" and capital controls that would prevent large withdrawals from the country. A decision on the controversial bank savings levy and how it would be applied is due on Saturday.
Other Cypriot politcians discussed a smaller bank levy of 1% which would be aplied to all accounts. The debate is divided between those that want the levy to be borne only by the wealthy which includes a high percentage of Russians who hold €30bn in Cypriot banks.
Eurozone ministers are scheduled to meet on Sunday to decided how to help Cyprus avoid economic chaos. The European Central Bank has threatened to cut off funding from Monday and the banks face a run of investors withdrawing money when they re-open.
The Cypriot parliament will meet after the meeting of the eurozone ministers on Sunday evening.
3 comments:
The European Community was a good thing - until 1979 when the first European Parliament was elected.
That was the first big mistake.
An inter-parliamentary solution would have been much better, i.e. small groups of national MPs from each member state coming together every three months or so to discuss problems arising and offer advice to governments.
The decision-making should have been kept at intergovernmental level - which is the most democratic option in a continent of nation-states.
And, of course, the commitment to ever-closer union should also have been scrapped at about the same time (i.e. 1979).
There are now two major phenomena which threaten to pull the EU apart:
1. interventions of politicians and unelected officials "across the borders" - causing increasing resentment in the member states.
2. the euro-related debt problems coupled with the competitiveness disparity
I think you are right.
On balance, I still think as I did back at the time of the EEC referendum in 1975 that the community is - just about - a good thing - despite many years seeing it in action at close quarters in Brussels.
But the Parliament really is an abomination. Whilst in principle it should be the most democratic of the institutions it is really only representative of the self-interest of its members - most of whom are professional politicians who could not get elected to national parliaments.
I recall an officials' Working Group in Brussels where the UK rep with much justification felt moved to remind colleagues that they were discussing the terms of legislation that would impose duties and sanctions on European citizens not drafting a political speech that would be forgotten after the next day's papers. The workings of the European Parliament take the mindset and behaviour being criticised to another level.
Cyprus Aims to Meet Bailout Terms Today as Deposit Levy Debated
Bloomberg
Cyprus will complete a plan today to meet the terms of a European bailout that may include tapping bank deposits, its finance minister said, as the Mediterranean island races to avert financial collapse
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