Brussels (dpa) - Cyprus early Saturday secured a long-awaited
bailout of up to 10 billion euros ($13 billion U.S.) to bolster its
troubled banking sector and public finances, but not without bank
depositors taking a significant hit through a new tax.
Deposits of less than 100,000 euros will be levied at 6.75 percent and higher deposits at 9.9 percent.
The one-time "stability levy" would be applied immediately, with
Cypriot authorities moving to freeze corresponding amounts in bank
accounts, as the tax is expected to be made law by the time banks on
the island reopen on Tuesday after a holiday.
The new tax - the first of its kind applied as part of a eurozone
bailout - is expected to generate 5.8 billion euros. It will apply to
both Cypriot residents and non-residents. About one-third of deposits
are in the hands of foreigners, especially Russians and British.
"It is not a pleasant outcome, especially of course for the people
involved," Finance Minister Michael Sarris said in Brussels after
negotiating the bailout deal. "But we believe it is something that is
- compared with other possible outcomes - the least onerous."
The tax is not meant to be "penalizing" the debt-ridden island,
the leader of the eurozone's finance ministers, Jeroen Dijsselbloem,
insisted Saturday after the negotiations with Sarris. He called the
tax a "very fair way of sharing the burden."
European Central Bank board member Joerg Asmussen described the
levy as "appropriate" and "tailor-made" for Cyprus. He said "there is
no risk that this will happen" to depositors in other bailout
countries.
The debt-riddled island is the fifth country in the eurozone to
receive a bailout, after Greece, Portugal, Ireland and Spain. It is
the first to have a full rescue package from the eurozone's new
bailout fund, the European Stability Mechanism.
Nicosia had haggled over the details for more than half a year
with the European Commission, European Central Bank and International
Monetary Fund (IMF).
The pressure was on to reach a deal Friday during the special
meeting of eurozone finance ministers, amid concerns that dragging
out the issue much longer could reignite the currency bloc's debt
crisis. The talks lasted almost 10 hours.
"This has been a very difficult process, but the result achieved
tonight reaches the essential goals of both maintaining financial
stability (in the eurozone) and ensuring debt sustainability in
Cyprus," EU Economy Commissioner Olli Rehn said.
"The Eurogroup has fulfilled its mission," French Finance Minister
Pierre Moscovici added on Twitter.
The bailout deal also foresees privatizations, a higher capital
income tax, a downsizing of the banking sector, the sale of Cypriot
bank branches in Greece, an increase in the corporate tax from 10 to
12.5 percent and forced losses for junior bondholders.
Debt in the country, expected to hit 93.1 percent of gross
domestic product this year, should not exceed 100 percent by 2020,
the Eurogroup said.
IMF chief Christine Lagarde described the plan as "sustainable,"
fully financed and a fair sharing of the burden. She said she would
recommend to her board that it participate in the bailout, but did
not specify its potential contribution.
The bailout deal also has to be endorsed by parliaments in several
eurozone countries, including Germany and Austria. The Eurogroup said
it hopes the rescue package to be finalized in April.
"Quick implementation is key now for Cyprus to regain access to
financial markets and return to growth as soon as possible," Asmussen
said.
German Finance Minister Wolfgang Schaeuble had warned Thursday
that the road ahead for Cyprus is "very difficult." German
politicians had accused Cyprus of being a haven for money launderers
and tax evaders, leading Nicosia to accept an international audit.
"(International) aid just for the problems not to be solved is no
aid," Schaueble noted.
Cypriot President Nicos Anastasiades has pledged to abide by all
conditions attached to the bailout. Sarris predicted that it "will
help mark a new beginning for Cyprus."
The island will also ask Russia for an extension of an existing
loan and possibly a second one as part of its international bailout,
officials had said Friday.
Sarris is set to travel to Moscow on Wednesday. His Russian
counterpart, Anton Siluanov, told the Interfax news agency that his
country will ask Cypriot banks to provide information on Russian
investments and companies in return for aid.
