17 Mar 2013

Savers angered at Cyprus bailout levy

8:55 am on 17 March 2013

The government of Cyprus has reached a bailout deal that includes a levy on all bank deposits, prompting savers to queue at banks to withdraw money.

The €10 billion debt rescue package, agreed with the eurozone and International Monetary Fund early on Saturday morning is significantly less than the €17 billion Cyprus had initially sought, AFP reports.

It includes €5.8 billion to be raised through the one-off levy of up to 9.9% on bank deposits.

The bailout deal prompted some to queue up outside banks to withdraw cash from ATMs.

Co-operative banks, which usually open on Saturdays, kept their doors closed as their systems were shut down, officials said.

One furious customer reportedly parked his digger outside one such branch in the seaside resort of Limassol, claiming the government had "tricked" him into believing deposits were safe.

Under the deal, a withholding tax would be imposed on interest on bank deposits, and Cyprus will have to raise corporate tax to 12.5% from 10% and sell off state assets to help balance the public finances.

Savers with more than €100,000 will pay the 9.9% charge and those under that threshold pay 6.75%. The fee will be charged when lenders reopen their doors after a public holiday on Monday.

Cyprus accounts for just 0.2% of the combined eurozone economy and is the fifth country to secure a debt rescue package from its eurozone partners in the three-year debt crisis.

Two rescues for Greece have been worth some €380 billion, bailouts have been made for Ireland (€85 billion) and Portugal (€78 billion) while €41 billion has been pumped into Spanish banks.