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Euro crisis: Cyprus shuts its banks until at least Thursday

By Catholic Online (NEWS CONSORTIUM)
March 19th, 2013
Catholic Online (www.catholic.org)

Cypriot government officials proposed changes to a volatile EU bailout plan in order to limit the impact on small savers. The fallout from the initial announcement this past weekend spurred angry protests outside the parliament building in Nicosia. Consumers on the tiny island nation of Cyprus rushed to banks and ATMs in an attempt to withdraw savings before the parliament ratified the measure.

LOS ANGELES, CA (Catholic Online) - The amended bill would drop the tax on bank savings of fewer than 20,000 euros but retain the levy at 6.75 percent on deposits of 20,000-100,000 euros, and 9.9 percent for deposits of 100,000 euros or more. Tabled before the House finance committee, the compromise was to be voted on by parliament later in the day.

The draft bill on the deposits levy does not compensate for the lost revenue by raising it for those who have deposits of more than 100,000 euros, and as a result, Panicos Demetriades, the central bank governor of Cyprus, told a parliamentary committee that the country would fail to raise the required $7.52 billion to secure a bailout from the EU if it scrapped the tax for smaller savers. "We will take less than 5.8 billion euros," Demetriades said.

After a meeting between Cypriot and EU officials, the eurozone told Cyprus to change its original plan, according to a statement issued.

The one-time tax was announced as part of an agreement that would see Cyprus granted a $12.95 billion sovereign bailout to avoid defaulting on its debts.

The euro and European shares fell for a second day, with investors unsettled by the risk of failure for the bailout deal aimed at saving Cyprus from default and its banks from collapse.

U.S. markets are expected to get off to a weak start due to the turmoil in the eurozone.

Eurogroup President Jeroen Dijsselbloem of the Netherlands said in a written statement that finance ministers "continue to be of the view that small depositors should be treated differently from large depositors and reaffirms the importance of fully guaranteeing deposits below [$130,000]."

The Cyprus government maintains that the raid on savings was required alongside international loans to supplement the bailout, the fifth such bailout in the eurozone over the past three years.

Cyprus has shut its banks until at least Thursday and delayed a parliamentary vote on the package until Tuesday.

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