Cyprus scraps bank levy in new plan

Written By Unknown on Kamis, 21 Maret 2013 | 19.12

21 March 2013 Last updated at 08:05 ET

Political leaders in Cyprus have dropped an unpopular levy on bank deposits in a new bailout plan.

There was outrage over an earlier plan to tax all bank deposits.

Cyprus' banks, which have been shut all week to prevent mass withdrawals, are to stay closed until next Tuesday.

Cyprus is required to find 7bn euros (£6bn; $9bn) to get a 10bn-euro EU-IMF loan. Cypriot officials now propose a state investment fund and special bond issue to raise 5.8bn euros.

The other 1.2bn would be raised through privatisations and by increasing capital gains tax and the corporate tax rate.

The European Central Bank has warned it may halt emergency funding on Monday if Cyprus fails to come up with a viable rescue plan by then.

Cypriots are finding it increasingly difficult to perform everyday financial transactions as cash and credit dries up.

"We didn't discuss a [deposit] haircut and we are not reverting to it," Cypriot parliament speaker Yiannakis Omirou told reporters, in remarks quoted by Reuters. He was speaking after an emergency meeting between politicians and President Nicos Anastasiades.

It is not yet clear if the new plan will be ready to be put to a parliamentary vote on Thursday.

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The country is surviving on a lifeline from the European Central Bank"

End Quote

The deputy leader of the ruling Democratic Rally party, Averof Neophytou, said party leaders had unanimously agreed to create a "solidarity fund" with state assets, which would be used for an emergency bond issue, Reuters reported.

That plan was confirmed by government spokesman Christos Stylianides.

The previous proposals had included a levy on deposits between 20,000 and 100,000 euros, which had outraged many Cypriots.

There has been much speculation that the new Cypriot plan could include Russian help, as Russia has multi-billion dollar investments in Cyprus.

Russians, including wealthy tycoons, hold between a third and half of all Cypriot bank deposits.

Russian Prime Minister Dmitry Medvedev has poured scorn on the eurozone's bailout plan for Cyprus, accusing EU leaders of behaving "like a bull in a china shop".

In Moscow on Thursday he told European Commission President Jose Manuel Barroso that all interested parties, including Russia, should be included in a deal for Cyprus.

The Cypriot Finance Minister Michalis Sarris is in Moscow for a second day to negotiate assistance.


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