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Finance ministers want Cypriots to sacrifice 10 percent of savings for bailout

By Catholic Online (NEWS CONSORTIUM)
March 18th, 2013
Catholic Online (www.catholic.org)

The tiny nation of Cyprus is working on a last-minute proposal to soften the impact on smaller savers of a bank deposit levy. A parliamentary vote on the measure central to a bailout was postponed until this week, a government source said. Euro zone finance ministers want Cyprus savers to forfeit a portion of their deposits in return for a $13 billion bailout for the island, which has been financially stymied due to its close proximity to neighboring Greece.

LOS ANGELES, CA (Catholic Online) - The decision stunned Cypriots and caused a run on cash points, most of which were exhausted within hours. In addition, electronic transfers were halted.

The originally proposed levies on deposits are 9.9 percent for those exceeding 100,000 euros and 6.7 percent on anything below that.

The Cypriot government talked with lenders the possibility of changing the levy to 3.0 percent for deposits below 100,000 euros, and to 12.5 percent for above that sum.

An unidentified source told Reuters that the discussions had the "blessing" of a troika of lenders from the European Commission, the IMF and the European Central Bank.

In Brussels, a spokesman for Olli Rehn, the European commissioner in charge of economic affairs, said discussions were still under way in Cyprus.

"If the Cypriot leaders agree on a more progressive scale for the one-off levy, in view of making it fairer for smaller savers and provided this would have the same financial impact, the Commission would be ready to recommend that the Eurogroup endorse such an agreement," the spokesman said.

The move to take a percentage of deposits, which could raise almost 6 billion euros, must be ratified by parliament, where no party has a majority. President Nicos Anastasiades has warned that Cyprus's two largest banks will collapse otherwise.

The Cyprus Popular Bank, could have its emergency liquidity assistance funding from the European Central Bank cut by March 21.

A default in Cyprus could unravel investor confidence in the euro zone, undoing the improvements fostered by the European Central Bank's promise last year to do whatever it takes to shore up the currency bloc.

The levy was scheduled to come into force on Tuesday, after a bank holiday on Monday.

Making bank depositors' bear some of the costs of a bailout had been all but forbidden in Europe, but euro zone officials said it was the only way to salvage Cyprus's financial sector. European officials said it would assure that it will not set a precedent - and officials were quick to say Cyprus was a unique case.

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