Cyprus: Panic Rush On Banks Before Austerity Levy Imposed

People queue to use an ATM machine outside of a Laiki Bank branch in Larnaca, Cyprus, Saturday, (AP Photo/Petros Karadjias

Cyprus: Panic Rush On Banks Before Austerity Levy Imposed

Stephen: While we’ve heard much about the Greek, Italian, Spanish and Portuguese austerity packages, the Cypriot situation has almost flown under the radar – until now.

An unethical  10% one-off levy on savings was forced on Cypriots when an extraordinary 10 Billion Euro bailout agreement was made in Brussels last week.

So what have the Cypriots done – from first thing Saturday morning they’ve rushed to empty their bank accounts.  But ATMs across the country now have ‘technical issues”. Thanks  to Alice.

Cyprus: Panic as Savings Levy is Imposed

By Paul Gallagher and Helena Smith, The Guardian – march 16, 2013

http://www.guardian.co.uk/world/2013/mar/16/cyprus-savings-levy-imposed-eurozone

Cypriots reacted with shock that turned to panic on Saturday after a 10% one-off levy on savings was forced on them as part of an extraordinary 10bn euro (£8.7bn) bailout agreed in Brussels.

People rushed to banks and queued at cash machines that refused to release cash as resentment quickly set in.

The savers, half of whom are thought to be non-resident Russians, will raise almost €6bn thanks to a deal reached by European partners and the International Monetary Fund (IMF).

It is the first time a bailout has included such a measure and Cyprus is the fifth country after Greece, the Republic of Ireland, Portugal and Spain to turn to the eurozone for financial help during the region’s debt crisis. The move in the eurozone’s third smallest economy could have repercussions for financially overstretched bigger economies such as Spain and Italy.

People with less than 100,000 euros in their accounts will have to pay a one-time tax of 6.75%, Eurozone officials said, while those with greater sums will lose 9.9%. Without a rescue, president Nicos Anastasiades said Cyprus would default and threaten to unravel investor confidence in the eurozone. The Cypriot leader, who was elected last month on a promise to tackle the country’s debt crisis, will make a statement to the nation on Sunday.

The prospect of savings being so savagely docked sparked terror among the island’s resident British community. At the Anglican Church’s weekly Saturday thrift shop gathering in Nicosia, Cyprus’s war-divided capital, ex-pats expressed alarm with many saying that they had also rushed to ATMs to withdraw money from their accounts. “There’s a run on banks. A lot of us are really panicking. The big fear is that there soon won’t be cash in ATMs,” said Arlene Skillett, a resident in Nicosia. “People are worried that they’re automatically going to lose ten present [of their savings] in deposit accounts. Anastasiades won elections saying he wouldn’t allow this to happen.”

She said a lot of elderly Britons had transferred savings to the island when they had decided to retire there.

“Nobody can understand how they can do this – isn’t it illegal? How can they just dock money from your account?” she asked.

In the coastal town of Larnaca, Cypriots described how they had queued from the early hours in the hope of withdrawing deposits from banks. “A lot of us just can’t believe it,” said Alexandra Christofi, a divorcee in her 40s who said she had rushed to her bank before doors even opened at 6am. “I had put my money there for a rainy day. It’s absolutely all I have and I cannot understand how Cyprus is being singled out. Other EU countries got bailouts and we’re only in this position because we supported Greece,” she said, referring to the massive losses the Cypriot banking system suffered as a result of Greece’s restructuring its debt last year. “Where is the fairness in that? Where is the solidarity and support that is meant to be the reason why we are all unified in this common currency in the first place?”

Maria Zembyla, from Nicosia, said the levy would make a “big dent” in her family’s savings and “erode the investor confidence”. “It is robbery. People like us have been working for years, saving to pay for our children’s studies and pensions and suddenly they steal a big share of this money. Russians that currently keep the economy afloat will leave the country along with their money,” she added.

Howard Skelton, in Limassol, said: “The only people who will benefit in the long term are the banks. It will be many years before the man in the street begins to feel any benefit from this bailout. The sooner I can return to the UK the better.”

The levy does not take effect until Tuesday, following a public holiday, but action is being taken to control electronic money transfers over the weekend. Co-operative banks, the only ones open in Cyprus on a Saturday, closed following a run on the credit societies while ATMs cancelled transactions due to “technical issues”.

“I wish I was not the minister to do this,” Cypriot finance minister Michael Sarris said after Friday’s late-night talks in Brussels. “Much more money could have been lost in a bankruptcy of the banking system or indeed of the country.”

Depositors started queuing early to withdraw their cash, and protestors gathered outside the presidential palace. “I’m extremely angry. I worked years and years to get it together and now I am losing it on the say-so of the Dutch and the Germans,” said British-Cypriot Andy Georgiou, 54, who returned to Cyprus in mid-2012 with his savings.

“They call Sicily the island of the mafia. It’s not Sicily, it’s Cyprus. This is theft, pure and simple,” said a pensioner.

IMF managing director Christine Lagarde, who attended the meeting, said she backed the deal and would ask her board in Washington to contribute to the bailout.

“We believe the proposal is sustainable for the Cyprus economy,” she said, “The IMF is considering proposing a contribution to the financing of the package. The exact amount is not yet specified.”

And this story from the Daily Mail:

Cash machines EMPTIED across Cyprus

By Simon Watkins and Alex Hawkes, Daily Mail -   March 16, 2013

http://www.dailymail.co.uk/news/article-2294388/ATMs-emptied-Cyprus-savers-learn-10billion-euro-bailout-agreement-includes-levy-bank-accounts.html

Up to 60,000 British savers are to lose thousands of pounds each after European finance chiefs ordered an unprecedented raid on personal bank accounts.

Expats and UK troops based in Cyprus will have their savings decimated as part of a painful bid to bail out the bankrupt island.

Britons have about £1.7 billion of deposits in Cyprus and could lose up to £170 million.

The Cypriot government has agreed to seize up to ten per cent of savings and use the money to bail out the island’s crisis-hit banking system.

The move sparked panic and violent protests yesterday as crowds desperately tried to withdraw their money at cash machines.

Restrictions have been imposed to stop people emptying their accounts or moving their money out of the country following the deal with other eurozone finance ministers, under which ordinary citizens’ deposits will be directly raided for the first time.

One furious expat said: ‘This is plain theft. I’d love to hear someone explain to me why it isn’t.’

And one of the 3,000 British service personnel based on the island said: ‘I stand to lose €4,000 [£3,500] We’ve tried to save quite hard while we are here – that’s been thrown back in our faces.’

Cypriot president Nicos Anastasiades, who agreed to the raid following ten-hour talks with European finance chiefs, said it was necessary because Cyprus was in a ‘state of emergency’ and failure to enact the Brussels plan would be ‘catastrophic’.

Under the deal, all bank deposits over €100,000 will be hit with a levy of 9.9 per cent. Those with smaller savings will pay 6.75 per cent.

The raid will raise €5.8 billion, which will be added to a €10 billion bailout from Brussels.

But financial experts said the move –designed to stop Cyprus crashing out of the euro, potentially destroying the currency – would send shock waves through the eurozone.

If savers in other troubled nations fear their accounts might be next, they could withdraw their money and spark a catastrophic run on the banks.

Economist Howard Archer from IHS Global Insight said: ‘It is an alarming precedent to hit the man in the street. As much as they say this is a one off, people will say if they can do it once they could do it again.’

Tory MP Douglas Carswell added: ‘We should all be extremely worried about this. It shows that ordinary Europeans are being fleeced by the Continent’s elite in order to rescue foolish banks. Why would you risk putting your money in Greek, Spanish or Portuguese banks after this?’

The European Central Bank said Britons have £1.7 billion deposited on the island.

British expats were stunned by the news, with many left high and dry by the restrictions on accounts.

Cash machines had been working, but many ran out of notes because of the panic withdrawals. Tomorrow is a public holiday in Cyprus, too, so savers will have to wait until Tuesday until they can access their money.

Andy Georgiou, 32, who grew up in Liverpool, said: ‘We are struggling. We can’t access money and we need it to buy petrol and food. It’s appalling. All without any warning.’

Sean Chamberlain, a 39-year-old writer from Devon who now lives in Cyprus, said: ‘There are a lot of people who are very angry. Everyone was furious, feeling absolutely betrayed by yet another apparently incompetent government.

‘And now they’ve done it once, what’s to stop them deciding to do it again next week? If there’s a run on the bank, that’s a terrifying thing.’

Shirley Brooks, 61, originally from Manchester, stands to lose €18,600. She said: ‘I am extremely angry. This is our retirement money, and there was no warning that this was coming. I don’t think we should have to pay anything as we did not cause the problems in the economy.’

Her sentiments were echoed by former Army officer Graham Smith, who moved to Cyprus from Dundee five years ago. ‘I don’t believe we Brits should have any money taken,’ he said. ‘We have not contributed to the bankruptcy. If anything, all we’ve done is contribute to the economy.’

He stands to lose about €2,000, as does financial adviser Steve Carr, who is originally from York but has been living in the coastal city of Limassol for the past 24 years.

He said the supposed solution to the island’s woes could make matters worse: ‘When the banks reopen, people will start moving their money out of Cyprus because they don’t want this happening again. This could create a run on banks, which would be a very bad thing for Cyprus.’

Angry crowds gathered to demonstrate outside the presidential palace in the capital of Nicosia yesterday.

President Anastasiades held emergency talks with his cabinet and other party leaders last night and is expected to make a televised address today explaining the situation.

Cyprus’ Finance Minister Michalis Sarris defended the decision to accept the levy, saying it was either that or a complete economic meltdown

Because of tomorrow’s public holiday, he has two days to pass a law to enact the Brussels deal in time to seize the cash from bank accounts before Tuesday morning.

In a statement he said: ‘We either choose the catastrophic scenario of disorderly bankruptcy or the scenario of a painful but controlled management of the crisis.’

An official said today that Cyprus’s parliament had postponed the debate and vote on the controversial levy on all bank deposits that the country’s creditors demanded in exchange for €10billion [£8.7million] in rescue money.

Parliamentary official Antonis Koutalianos said the vote that was scheduled for the afternoon today has been pushed back to tomorrow, but the exact hour of the vote has yet to be fixed.

It is understood savers will be offered shares in Cyprus banks as compensation for the raid on their savings, but it is unlikely to appease those who have lost hard cash.

A spokesman for the Cypriot government said yesterday the agreement with Brussels was ‘serious but not tragic’ and said that the EU had wanted a much higher levy, but the government had fought hard against it.

He said: ‘The dilemma is whether we would have a functioning economy or total collapse on Tuesday .  .  . whether to give in at the 6.75 per cent mark or lose 100 per cent.’

The UK’s Ministry of Defence declined to comment, but Government sources suggested Ministers were considering whether to help the British troops affected.

Chancellor George Osborne said today that the situation in Cyprus was ‘an example of what happens if you don’t show the world that you can pay your way’, adding: ‘We are not part of the bailout.’

He told BBC One’s Andrew Marr Show: ‘The Cypriot banks in Britain are not going to be included in this bank tax. It’s a very difficult situation for people who live in Cyprus

‘But for people serving in our military and government out in Cyprus, we’re going to compensate anyone who is affected by this bank tax – people who are doing their duty for our country.’

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2013-03-17 05:01:40

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