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article imageCyprus/Troika agree to 20% tax on deposits of over 100,000 euros

By Anne Sewell     Mar 23, 2013 in World
Nicosia - Following negotiations between Cyprus and the Troika, a 20% tax is to be taken from deposits of 100,000 euros and more held in the Bank of Cyprus, and 4% on deposits over 100,000 euros held at other banks. (Video update.)
After European Union Economic and Monetary Affairs Commissioner, Olli Rehn said in a statement that there are "no longer any optimal solution available for Cyprus - only hard choices," agreement has now been reached.
Cyprus is struggling to raise €5.8 billion, a prerequisite for a further €10 billion in bailout funds.
After the rejection by lawmakers of a previous proposal to tax all bank deposits caused the European Central Bank to threaten to cut off emergency funding to banks in Cyprus, unless a deal could be reached by March 25, Cyprus was forced to make an agreement.
Banks have been closed all week and Cypriots have been withdrawing as much cash as possible from ATMs in the meantime. The banks are reportedly now due to reopen on March 26.
On Saturday around 1,500 bank workers in Cyprus demonstrated in the streets of the country's capital, Nicosia, against the latest bailout measures taken by the country's central bank.
Demonstrators of all ages were present, with many parents pushing their children in strollers. Protesters were heard to chant, “You destroy our work and steal our pensions,” as they marched to the Cypriot Parliament. One protester held a banner which read, “Hands off pension funds.”
Angela Panayotou, an employee with Cyprus Popular Bank, was there with her five children. She said, “I’ve been working for 20 years and I’ve paid all the taxes of all my pension contributions and every Euro. Now I run the risk of losing my job and my pension, and I will have no money to support my children.”
Adding that she believes plans to split the Cyprus Popular Bank in two to be a political move.
“We are convinced that the bank is viable, and there’s no need to close it,” she said.
However, a senior Cypriot official told Reuters that a plan to tap nationalized pension funds would not be a part of the plan to raise billions of euros in return for a bailout from the European Union.
Volker Kauder, parliamentary leader for German Chancellor Angela Merkel's Christian Democrats told the media, "In our view, the pension fund cannot be made part of the rescue plan."
It was said on Saturday that Cyprus is looking at seizing 20% of the value of big deposits at its largest bank as a way to raise such funds.
Reportedly the new bailout plan adopted by the Cypriot parliament will comprise nine laws about the recovery of the country’s financial system. One of these laws gives the Cypriot Central Bank special authorities due to concerns the financial system may collapse.
So while "bank robbery" as the people called it was voted out on Tuesday last week, it seems it will now go ahead to avoid the country missing Monday's deadline and being ejected from the Eurozone.
Eurozone finance ministers are planning to meet on Sunday evening to check if Cyprus' figures add up to what has been agreed with its international lenders.
Cypriot President Nicos Anastasiades tweeted: "We are undertaking great efforts. I hope we have a solution soon."
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