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Cyprus's Cash Machines Run Dry

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People in Nicosia, Cyprus give their reactions to news the government is imposing a tax on bank savings as part of its bailout deal. Aside from the long-term financial implications, the levy announcement sparked a rush on cash machines, meaning many are unable to withdraw money. The levy 9.9% on savings over 100,000 and 6.75% on savings below 100,000 - is expected to raise 6bn (5.2bn) as a condition for the bailout.

Posted March 17, 2013

 

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Cyprus Shellshocked over Eurozone Bailout

By David Vujanovic

March 16, 2013 "
Information Clearing House"
-"AFP" - NICOSIA: Residents of Cyprus have reacted with shock after the government agreed to a 10 billion euros ($12.62 billion) bailout that includes an unprecedented levy on all bank deposits.

The debt rescue package, agreed with the eurozone and International Monetary Fund early on Saturday morning after around 10 hours of talks in Brussels, is significantly less than the 17 billion euros Cyprus had initially sought.

It includes 5.8 billion euros to be raised through the bank deposit levy of up to 9.9 per cent, which will apply to everyone from pensioners to Russian oligarchs and tens of thousands of British expats.

At the same time, a "withholding tax" would be imposed on interest on bank deposits, and Cyprus will have to hike corporate tax to 12.5 per cent from 10 per cent and sell off state assets to help balance the public finances.
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Though it was reached too late for Cyprus newspapers the bailout deal prompted some to queue up outside banks to withdraw cash from ATMs.

But analyst Sony Kapoor cautioned that there was no point, tweeting: "Dear Cyprus bank depositors, the time to line outside ur banks was last week, no point now."

A flood of angry comments flowed on the internet.

"The Cyprus deal is exactly why I don't keep money in the bank anymore. Brussels can commandeer your cash. Just like that," one person wrote on Twitter.

Government spokesman Christos Stylianides tried to calm shell-shocked Cypriots saying: "The situation is serious but not tragic, there is no reason to panic."

The levy will see deposits of more than 100,000 euros hit with a 9.9 per cent charge when lenders reopen their doors after a scheduled public holiday on Monday. Under that threshold and the levy drops to 6.75 per cent.

Co-operative bank branches, which, unlike the main lenders, usually open for business 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.

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

The price tag is very small compared with two rescues for Greece worth some 380 billion euros, Ireland's 85 billion euros, Portugal's 78 billion and 41 billion for Spanish banks.

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