Cyprus bank crisis: British troops’ savings fear

CYPRUS’S parliament yesterday postponed a crucial debate and vote on a levy on all bank deposits that the cash-strapped country’s creditors demanded in exchange for €10 billion (£8.6bn) in rescue money.

The debate was postponed after a run on banks, with residents rushing to autoteller machines to withdraw their savings.

European officials said people with less than €100,000 in their accounts will have to pay a one-time tax of 6.75 per cent and those with more will lose 9.9 per cent.

However, last night officials were talking about changing the levy to 3 per cent deposits of less than €100,000, and 12.5 per cent for those above that.

Reports last night also suggested that the European Central Bank was pressuring Cypriot authorities to hold the vote without delay.

British troops who face having their savings raided because of the European bailout of Cyprus will be compensated, the British government said.

Around 3,000 military personnel and 250 civil servants will be protected should their savings be subject to the levy, the Treasury said.

The stakes are high for the tiny island nation of one million people, because a rejection of the one-time tax by politicians could send Cyprus into bankruptcy and possibly out of the common euro currency.

Officials also fear negative global market reaction today and a run tomorrow on Cypriot banks no matter which way the voting goes. Today is a national holiday.

The vote was pushed back to this afternoon, parliamentary official Antonis Koutalianos said.

President Nicos Anastasiades had personally requested the postponement but no reason was given, state media said.

The decision by Cyprus’s 16 eurozone partners and the International Monetary Fund to impose a one-time tax was a significant shift. It marks the first time they have dipped into people’s savings to finance a bailout – a move that analysts worry may unsettle international markets and jeopardise Europe’s fragile economy.

The levy is expected to raise €5.8bn to recapitalise the nation’s banks and service the country’s debt. Cypriot banks got into trouble after losing some €4.5bn on their Greek government bond holdings after eurozone leaders decided to write down Greece’s debt last year.

The demand for the levy has enraged Cypriot politicians, who have condemned it as unfair, bringing into doubt its approval in the 56-seat parliament.

“There are two choices: voting in favour which allows the country to avoid a disorderly bankruptcy, or rejection, which will have us face a disorderly bankruptcy with all that that entails,” said Averof Neophytou, deputy chief of the ruling Democratic Rally party.

Depositors flocked to ATM machines in Cyprus on Saturday, trying to pull out as much money as they could.

It is not only Cypriots who will take a hit but foreigners as well, including many Russians who are estimated to have some €20bn sitting in Cypriot banks.