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Cyprus Parliament Postpones Vote On Controversial Savings Tax

  • RFE/RL

People withdraw money from an ATM in the Cypriot capital Nicosia. A proposed tax on savings has caused outrage in the island country.

People withdraw money from an ATM in the Cypriot capital Nicosia. A proposed tax on savings has caused outrage in the island country.

The Cyprus parliament has postponed a vote on whether bank depositors should hand over part of their savings to help fund an international bailout of the Mediterranean country.

The vote is now scheduled for March 19.

The bailout agreement has sparked public anger and triggered massive cash withdrawals. Cyprus banks will remain closed until March 21 amid the crisis.

Under the proposal announced on March 16 by Cypriot leaders and international lenders, depositors will be forced to contribute up to 10 percent of their savings in return for 10 billion euros in aid to recapitalize banks and prevent Cyprus from going bankrupt and leaving the eurozone.

The move has infuriated Cypriots, some of whom are calling it legalized theft.

It has also caused anger in Russia, where many banks, companies, and individuals have placed their money in Cypriot banks.

Russian President Vladimir Putin has criticized the proposed levy as "unfair, unprofessional, and dangerous."

Presidential spokesman Dmitry Peskov said Putin made the comment on March 18 at a special meeting to discuss the situation in debt-stricken Cyprus.

The controversial tax would apply to both Cypriot residents and nonresidents.

According to the Moody's rating agency, Russian banks and companies had more than $30 billion in Cypriot banks at the end of last year.

On March 18, Cyprus's parliament is scheduled to vote on the proposal, which was announced on March 16 by Cypriot leaders and international lenders.

According to the proposed legislation, deposits of up to 100,000 euros would be taxed at 6.75 percent. Deposits above that amount would be hit with a 9.9 percent tax.

Under the bailout deal, the country would then receive 10 billion euros in aid to recapitalize banks and prevent the island nation from going bankrupt and leaving the eurozone.

Estimates suggest the levies could raise 5.8 billion euros.

On March 17, President Nicos Anastasiades defended the deal, calling it the "least painful" option to prevent Cyprus from going bankrupt and being forced to leave the eurozone, adding that “above all it leaves the operation of this country in our hands."

Fear Of Massive Withdrawals

But the move -- described as a one-time-only tax -- has been roundly condemned by many Cypriots.

March 18 is a bank holiday in Cyprus, but there are fears that depositors could make massive withdrawals once the banks reopen.

British nationals living in Cyprus accused the government there of stealing their money:

"On Tuesday [March 18] I plan to go to the bank and withdraw all the money I have in there and have nothing left in there,” Susan Kearns told reporters. “ You know, I can't trust them anymore. It's theft. They're stealing from me."

I think it's particularly unfair for people who have saved and tried hard to keep some money in the bank, and it's just a blanket tax across everybody,” said Stewart Cowell. “I understand people with higher savings getting taxed more, but 6.75 percent seems an awful lot of money to me."

In an address on March 17, Anastasiades pledged that efforts would be made to limit the impact of the levies on small depositors. He said savers forced to pay would be compensated by receiving shares in banks that would be guaranteed by future natural gas revenues.

Residents in the capital Nicosia who were making withdrawals from bank machines on March 17 expressed dismay.

"I feel like everyone else,” said one. “Annoyed and angry at the situation we are facing. We have no idea what we will face tomorrow. The situation is really difficult."

Another man claimed the tax was particularly unfair in his case.

"I have a bank loan from a government organization for 12,000 euros to support my daughter's studies,” he said. “ I deposited the money at the bank and now I will lose an amount that I have to pay back with interest."

European officials have sought to calm the situation by saying the decision in a country of less than one million people will not set a precedent for other nations that may need international bailouts.

With reporting by Reuters and AFP
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