19 Mar 2013

Cyprus works to amend controversial bank tax

11:30 pm on 19 March 2013

Banks in Cyprus remain closed as the country's ministers scramble to revise the terms an international bailout package which has sparked uproar on the island.

As part of a €10 billion bailout by the European Union the government announced at the weekend it had agreed to impose a one-off levy on bank savings.

President Nicos Anastasiades has been meeting MPs before Parliament votes on Tuesday on the deal.

Reuters reports the government was working to soften the blow to smaller savers by tilting more of the tax towards those with deposits greater than €100,000.

The decision to tax bank accounts stunned Cypriots, and police sealed off parliament in Nicosia as about 400 people staged a noisy protest outside. Residents emptied cash machines over the weekend.

The government said Cyprus had no choice but to accept the bailout with the levy on deposits, or go bankrupt.

A European bank official has indicated changes to the terms would be acceptable as long as the return of about €5.8 billion euros was maintained.

European Central Bank policymaker Joerg Asmussen said it was up to the government to decide if it wants to change the structure.

Russia criticises deal

Russian President Vladimir Putin branded the decision to place a levy on bank deposits "dangerous" and "unfair".

The EU agreed the move without involving Russia which has strong financial ties with the country.

Russians account for much of the billions of euros held in Cypriot banks by foreign depositors and its banks are heavily exposed to the island.

There are almost 70 billion euros in deposits held in Cyprus. A little less than half that is held by non-residents, most believed to be Russian.