The EU will lend Cyprus 10 billion to avoid the bankruptcy. The statement was made after Cyprus woke up with a decision to impose an unprecedented all-out haircut on Cypriot deposits.
President Anastasiades in a press conference yesterday explained that they have faced decisions that had already been taken, the solution chosen may be painful, but it was the only one that will allow Cypriots to continue with their lives without adventures. It was a decision that leads to the historic and permanent, according to his words, rescue of the Cypriot Economy.
The current president highlighted that to reject the deal would have meant the collapse of the Popular Bank because the ECB had already decided to cut its emergency liquidity while Bank of Cyprus would not have been able to avoid the same fate. According to President Anastasiades a collapse of the banking sector could have led to an exit from the Eurozone and a devaluation of the island’s currency by at least 40 per cent.
The ONE-OFF levy may take place Tuesday, 19 of March. Not only Cypriot commercial and co-operative banks will be affected but also Barclays, Russian Commercial Bank and Societe Generale, among others, would be affected.
Therefore any account with a credit balance will be subject to the levy, be it a deposit or a current bank account.
Almost half of the savers are non-resident Russians. The government asked to pay up to 10 per cent of their deposits to raise around 5.8 billion euros.
People with less than 100.000 euros in Cypriot bank accounts will have to pay a one-time tax of 6.75 per cent, while those with more will have to pay 9.9 per cent. Savers will be compensated in the form of bank shares of an equal value amount contributed, as Michalis Sarris, Finance Minister, announced.
In return for the 10 billionEuros help Cyprus has been asked to increase the corporate tax by 2.5% reaching 12.5%. Cyprus corporate tax however remains one of the lowest ones in the Eurozone.
The Economy Chief spoke of a ‘historically difficult decision,’ stressing that the alternative was far worse.
‘Some were pressing for a far larger haircut