Cyprus says No to EU’S raid on bank accounts
THE euro was plunged into fresh crisis last night as Cyprus flatly rejected plans to raid bank accounts on the debt-ridden island to save its basket-case economy. In a stunning rebuke to European leaders, the Cypriot Parliament voted to reject draconian plans to seize up to 9.9 per cent from the bank accounts of islanders, including 3,000 UK service personnel and 60,000 other Britons who have made their homes there.
Not one MP backed the proposal, which the German government had demanded in exchange for backing a fresh bailout for the bankrupt Cypriot economy.
Protestors cheered in the streets outside the Parliament when the result was announced, chanting: ‘Cyprus belongs to its people.’
The vote plunges the single currency into fresh turmoil as Cyprus will now have to find €5.8billion to pay its debts if it is to win a new €10billion bailout fund from the EU.
Without external funds, the country’s banks face collapse and the government could go bankrupt. Most cashpoints are already out of service.
There was renewed speculation last night that the hugely unpopular tax raid demanded by Germany will push Cyprus into the arms of Russia, which is seeking a toehold in the Mediterranean. Cypriot Finance Minister Michalis Sarris was in Moscow last night seeking a bailout, which would allow the country to ignore the diktats of Berlin, Brussels and the European Central Bank. Rumours were rife last night that Russian energy giants Gazprom and Rosneft could bail out Cyprus in return for access to Cypriot gas reserves.
On a day of farce, Mr Sarris was reported to have asked to resign and been told that he could not – claims he later denied.
Cypriot officials also threatened to pull out of the euro altogether if Germany and EU officials sought to impose the tax.
The original plan would have seen those with savings under €100,000 pay a tax of 6.75 per cent, and those above that amount would be taxed at 9.9 per cent on their deposits.
Facing fury at home and from Russians who make up an estimated third of the total amount in Cypriot banks, the Government amended the bill yesterday to exempt small depositors with up to €20,000 in the bank. But this was rejected by MPs.
The former governor of the Cypriot central bank, Anthanasios Orphanides, claimed: ‘What we’re witnessing is the slow death of the European project.
‘What we have seen for the last few days is a very serious blunder by European governments that essentially are blackmailing the government of Cyprus to confiscate the money that belongs rightfully to depositors
‘No-one can feel safe’
in the banking sector in Cyprus.
‘It is sending a message that no-one with deposits in a small country like Luxembourg should feel safe about their deposits. No-one with deposits in a weak country, like Spain, should feel safe about deposits.’
Although Cyprus is the smallest eurozone country to be bailed out, the details of the plan had sent shockwaves through the single currency area as it was the first time savers’ banks accounts have been directly targeted.
Last night Cyprus and EU bosses were in a stand-off.
Nicholas Papadopoulos, the chairman of the Cypriot parliamentary finance committee, said banks would remain closed ‘for as long as we need to conclude an agreement’. That could mean Cypriots going without money until next week.
In Germany, Chancellor Angela Merkel’s government refused to shift its demands.
French Finance Minister Pierre Moscovici said the eurozone could not lend Cyprus any more money, since the country’s debt would become unmanageable.’
The European Central Bank, shocked by the decision, said that it is willing to provide liquidity to Cyprus.
In a statement, it said: ‘ The ECB takes note of the decision of the Cypriot parliament.
‘The ECB reaffirms its commitment to provide liquidity as needed within the existing rules.’
AFTER the Mail highlighted the plight of British troops in Cyprus, George Osborne was clearly right to overrule the Ministry of Defence and promise to repay ‘every penny’ they may lose from the island’s planned tax raid on bank savings.
The only wonder is that the MoD was prepared to shirk part of its responsibility.
As for the other 60,000 Britons in Cyprus, whose savings remain at risk as the EU considers last night’s flat rejection of the tax, they deserve our heartfelt sympathy.
They are still threatened with a smashand-grab raid which would set a truly terrifying precedent for savers in all the troubled nations of the eurozone.
But l et nobody believe our own Government and central bank are any better. On the contrary, they’ve been dipping their greedy fingers into British savers’ accounts for years.
Indeed, Quantitative Easing has devalued the pound by some 25 per cent since the crisis began, while pitifully low interest payments (taxed at source) have, with inflation, further eroded the real value of deposits.
Doesn’t the 10 per cent raid proposed by the robber barons of Cyprus begin to look positively benign by comparison?
On the hustings, the Tories promised they would reward the prudent who ‘did the right thing’. So why have they been punishing them savagely ever since?