Cypriot ministers yesterday were trying to revise a plan to seize money from bank deposits before a parliamentary vote today that will either secure the island’s financial rescue or lead to its default, with reverberations across the eurozone.
The weekend announcement that Cyprus would impose a tax on bank accounts as part of a 10 billion euros (US$13 billion) bailout by the EU broke with previous practice that depositors’ savings were sacrosanct. The euro and stock markets fell on concern that the eurozone crisis was returning.
Before the vote, which is too close to call, the Cypriot government was working to soften the blow to smaller savers by tilting more of the tax toward those with deposits greater than 100,000 euros. Many of these depositors are Russians and the planned levy has already elicited an angry reaction from Russian President Vladimir Putin.
Photo: EPA
The government says Cyprus has no choice but to accept the bailout with the tax on deposits, or go bankrupt.
A Cypriot source said the introduction of a tax-free threshold for smaller bank deposits — maybe up to 20,000 euros — was under discussion, but not yet agreed.
The parliamentary speaker said debate on the bank levy would be delayed until 4pm GMT today, suggesting banks, shut yesterday for a bank holiday, will remain closed today.
The eurozone has indicated that changes would be acceptable as long as the return of about 6 billion euros is maintained. If the Cypriot parliament votes the deal down, the eurozone risks being dragged back into crisis.
“It is up to the government alone to decide if it wants to change the structure of the ... contribution [from] the banking sector,” European Central Bank policymaker Joerg Asmussen, who was pivotal in the weekend negotiations, told reporters on the sidelines of a conference in Berlin, Germany.
“The important thing is that the financial contribution of 5.8 billion euros remains,” he said.
Cypriots emptied cash machines to get their funds. The move also unnerved depositors in the eurozone’s weaker economies. Investors feared a precedent that could reignite market turmoil that the European Central Bank has calmed in recent months with its pledge to do whatever it takes to save the euro.
The euro fell before tempering losses. European stocks did similarly, dropping 2 percent before more than halving losses. In the bond market, safe haven German Bund futures shot up, while Italian equivalents dived, suggesting some concern that Cyprus could infect its larger neighbors.
“The most important question is what would happen the following day if the bill isn’t voted,” Central Bank of Cyprus Governor Panicos Demetriades told parliament.
“What would certainly happen is that our two big banks would need to be consolidated. This doesn’t mean that they would be completely destroyed. We will aim for this to happen in a completely orderly way,” he said.
US economist Paul Krugman wrote in the New York Times: “It’s as if the Europeans are holding up a neon sign, written in Greek and Italian, saying ‘Time to stage a run on your banks!’”
Cyprus’ banking sector dwarfs the size of its economy and its banks have been severely hurt by exposure to much larger neighbor Greece.
Its open economy has meant its banks also attract cash from Russians. Moscow is considering extending an existing 2.5 billion euros loan to help bail the island out and said that it not being consulted about the bailout would come into play.
“It turns out that the eurozone actions ... took place without discussions with Russia, so we will consider the issue of restructuring the [Cyprus] loan taking into account our participation in the joint actions with the European Union,” Russian Finance Minister Anton Siluanov said.
Putin criticized the bank levy as unfair and setting a dangerous precedent.
“Putin said that such a decision, should it be made, would be unfair, unprofessional and dangerous,” Kremlin spokesman Dmitry Peskov told reporters.
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
LANDSLIDES POSSIBLE: The agency advised the public to avoid visiting mountainous regions due to more expected aftershocks and rainfall from a series of weather fronts A series of earthquakes over the past few days were likely aftershocks of the April 3 earthquake in Hualien County, with further aftershocks to be expected for up to a year, the Central Weather Administration (CWA) said yesterday. Based on the nation’s experience after the quake on Sept. 21, 1999, more aftershocks are possible over the next six months to a year, the agency said. A total of 103 earthquakes of magnitude 4 on the local magnitude scale or higher hit Hualien County from 5:08pm on Monday to 10:27am yesterday, with 27 of them exceeding magnitude 5. They included two, of magnitude
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique