Cyprus Bailout: Savers Lose Money In EU Deal
Anyone with savings in a Cyprus bank will lose some of their money under a ground-breaking bailout deal agreed by European finance ministers.
Bank customers will pay a levy of up to 9.9% on their savings, a charge which will raise nearly 6bn euros (£5.1bn).
Cyprus is the fifth country to seek a bailout following Greece, Ireland, Portugal and Spain but the terms of the deal are a radical departure from previous schemes.
EU finance ministers have agreed to lend the indebted island 10bn euros but in return the public will be forced to forfeit part of their savings.
Savers with more than 100,000 euros (£86,500) in the bank will be charged a one-off levy of 9.9%. Those with less will be charged 6.7%.
It will apply to everyone from pensioners to Russian oligarchs, who are alleged to have billions stashed away in what officials say is a bloated Cypriot banking sector.
Cyprus' finance minister Dimitris Sarris said in a statement: "We had to make some very painful decisions - and I believe that looking at the benefit of Cypriots and all the depositors of this age and the next, we took the less painful one.
"The problem of Cyprus is different to the other countries that are under the support of Europe. It's to do with the magnitude of the bank system and the danger that exists from the effort that Europe demands from us to do to in order to reduce the cost of the adaption of the new situation."
Private investors will also face a second hit under a "withholding tax" imposed on interest on bank deposits.
The tax will apply to all deposits held in banks within Cyprus, including an estimated 2bn euros (£1.75bn) of British money, according to the European Central Bank.
However, it will not affect deposits held in the UK branches of Cypriot banks, such as Bank of Cyprus, whose UK subsidiary is regulated by the Financial Services Authority.
More than a third - 37% - of cash held in the Cypriot banking system belongs to non-residents and the country has a large British expat community.
Queues of people gathered at cash machines on the island on Saturday as they tried to withdraw their money ahead of the move.
And the country's cooperative banks had to shut their doors after seeing a rush of savers keen to protect their money.
Savers could apparently withdraw money but were not able to carry out electronic transfers.
British expat David Symonds, who lives in Limassol, told Sky News: "Everybody was surprised. We were assured only a few days ago that the haircut on the deposits was a red line for the government.
"When we learned that it might become a possibility we were told it would only be on deposits above 100,000 euros. Now of course we know it affects everybody."
British Cypriot Andy Georgiou, 54, moved his life savings to Cyprus last year after selling his home in London.
"I am extremely angry. I worked years and years to get it together and now I am losing it on the say-so of the Dutch and the Germans," he said.
Andri Menelaou, 25, had thought anything below 100,000 euros was protected by the state and said: "I don't have much but I don't see why I should pay for bank mistakes."
The move is expected to generate 5.8bn euros (£5bn) for Cyprus, which first applied for a bailout in June 2012.
Banks have already taken steps to freeze the required amount in deposit accounts and parliament is due to vote on the levy on Sunday.
Nicholas Papadopoulos, head of parliament's Financial Affairs Committee, said: "My initial reaction is one of shock.
"This decision is much worse than what we expected and contrary to what the government was assuring us, right up until last night."
Mr Papadopoulos, Vice-Chairman of the Democratic Party, which is a coalition partner in government, said he did not want to predict how parliament would vote.
"If we go ahead with this, there is a great risk it is not the end. The banking system will still face instability because it will face a significant capital flight," he said.
Cyprus was badly hit by the Greek financial crisis because of its close links to the country.
Its two largest banks saw combined losses of 4.5bn (£4bn) euros - equal to a quarter of the island's gross domestic product.
The rescue package was agreed after 10 hours of talks in Brussels and was significantly less than the 17bn euros (£14.7bn) asked for.
As part of the deal, the government will also have to hike corporate tax to 12.5% from 10% and sell off state assets to help balance the public finances.
Dutch finance minister Jeroen Dijsselbloem said: "As it is a contribution to the financial stability of Cyprus, it seems 'just' to ask a contribution of all deposit-holders."
French finance minister Pierre Moscovici added: "We did what we had to."
what do you think?
We should never have been forced to have bank accounts
Agreed, how secure is your money when everyone you have ever worked for have your bank details ?
And this would all be happening in the UK if Labour had their way
Agree Michael. Euro should have never been adopted as politicians are no good with money. Look at Ed Balls and other Labour Chancellors
If you had any savings in any of the banks Gordon Brown bailed out you should be thanking him,I'd have just let them go bust along with your money.
bjnk most savings were guaranteed - banks go bust the tax payer pick up the lot
Windows How safe is anything that the government is involved with. They all make up the rules as they to suite situation on the day, Millions of hard work people paid into pensions encouraged by all governments only for Gordon to change the rules to fund the government spending. We listen to those moaning their hand out are restricted to a 1% freeze, a thank you to those whose pension have been raided to pay for the increase would not be out of place
Cyprus gets £5 billion but everyone losing their savings has to pay 10% and all the European parliament lot still buy £2,000 bottles of wine and pay themselves millions?
Its just another tax the average worker or pensioner has 2 take on the chin lets face it the people wit the overseas accounts put their money in another country for a reason and they really wont feel it so badly it worries me that our own gov could get ideas about this
SANDRA it would be realy nice if all average workers had £87,000 in the bank Must be realy high paid average workers in cyprus
Sandra Too late Gordon Brown beat the EU to it by raiding pension investments
Thats right Michael, he didnt have the guts to go the whole way at the time but he would have got there evntually. Anything to keep giving our cash to africa in his mad attempt to portray himself as a world leader.
Michael At least its not my spelling your picking up for a change lmao
Sandra I can not recall ever responding to a post from you in the past With regard to your spelling, I could not tell if its right or wrong, I have a problem with dyslexia, therefore I have a problem myself
James R McCulloch
A similar issue happened in Argentina. Pesos for dollars ans strict export controls. Be warned.
This is the beginning of the end for the EU. They can't even afford a real bail out of Cyprus. The fourth reich is dead- Thank God!
Hmm, a small country like Cyprus gets hammered while the bigger beasts are allowed to spend, spend, spend. EU bullying.
Precisely. They have their own agenda and sod the wage earning man...
David I admire you concern for the money laundering capital of europe
The true face of the EU. Bring about circumstances where its nigh on impossible to operate without a bank account and then steal from them when politicians skrew up. This is exactly the sort of thing that brown and balls would have been trying on if they had remained in power.
Yes. I'd happily hang Brown for his malicious damage to UK economy.
Steve V.Most of them should be tried and a just sentance should be passed.
Anyone with bank accounts in other EU countries should take heed and withdraw their money now. How on earth can people with properties abroad pay their bills without a bank account? This is nothing but robbery. Another reason why the UK should pull out of the EU.
Another blessing of being in the EU.................NOT
I'm sure there's some deeper logic here that's lost on me, but as I see it, if it were me losing part of MY savings, I'd go berserk. What a liberty! Thieving b'stards.
What ever way yo look at it - The taxpayer will pick up the bill in the end. It is the only source of income a government has And there are many on here who believe those with money should be taxed out of the country
Well micheal its better than taxing people without money.
Shaun explain how you can tax people without money please In my book 10% of nothing is nothing. is it me or you who are stupid
Perhaps Cypriots should take their Government to the ECHR for violating their rights under article 1 of the Protocol to the ECHR which protects personal property Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
I think the government could claim that saving the country from bankruptcy was in the public interest.
Why blame the EU? It was the Cypriots who got themselves into this mess. I suggest people here start to look at their bank arrangement it could and probably will happen here in some form.
We all know full well, sooner or later we're going to get this. All the time we have a governments that couldn't give a monkeys about the British then we are stuffed.
Disgusting!!! People save for years to protect themselves in retirement etc. just for the EU to take it away. The sooner everyone gets out of this self-financing, robbing, mob, the better.
Richard = The ECB is giving Cyprus many more in billions that it is asking the Cypriots to contribute. The money that the ECB is giving to Cyprus has to be accounted for and a contribution should be made by those who is it going to help. Without the assistance from the EU the banks in Cyprus could collapse and then the savings would be worthless.
this is just the start..if this dose not make you vote ukip and get the hell out of the eu,then you must be brain dead.
Parliament - which negotiated the levy - is due to vote this week. The ECB is giving billions to Cyprus and of course the alternative would be far worse for Cyprus. It is fair that those who are being given money are then asked to contribute towards the cost. Only those with over 100K in savings are being levied 9.9%. Cyprus' banks hold much foreign money - much of which is believed to be laundered. In order for the economy to recover a loan is required. It is fair that deposit holders should contribute.