SUNDAY MAIL

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BLACK DEATH

PROPERTY

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Skeletons thought to be victims of the Black Death unearthed

Making your home ‘heavy metallic’ with lastest trends

TV and lifestyle supplements to see you though the week

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www.cyprus-mail.com

March 17, 2013

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COFFEESHOP: NIK CARRIES THE CAN FOR THE VILLAGE IDIOT INSIDE Cyprus Women’s football earns place in the sun 7

World Pope wants poor Church serving the needy 9

Reportage Going underground - Europe’s big infrastructure project centre

Lifestyle Ditch the baby advice books and grab a granny 20

Sport Manchester City’s title hopes in tatters back

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Cyprus reels from haircut ‘They took our money while we slept’ Page 4 Decision was ‘vindictive and neo-colonial’ Page 5 Bank accounts will be cut by Tuesday Page 6 Caught between a rock and a hard place Page 11 By Stefanos Evripidou

T

HE DECISION to impose an unprecedented all-out haircut on Cypriot deposits was a painful one, but it was the only option to avoid bankruptcy of the state, said President Nicos Anastasiades yesterday. The statement was made after Cyprus woke up to a horrific hangover yesterday morning when it transpired after a marathon ten-hour Eurogroup session that a haircut on all bank deposits would be imposed in Cyprus, along with an increase in corporate tax and a doubling of the tax on interest earned from savings. The tradeoff was reaching political agreement on a Cyprus bailout to the tune of €10 billion, around €7 billion less than initially estimated, with the participation of the IMF. The loan, unlike the haircut on deposits, will be paid back in cash. Overnight, what was previously declared a red line by Anastasiades and Finance Minister Michalis Sarris became a reality. For the first time in the eurozone, a haircut would be imposed, not on state creditors or bondholders, but on everybody with savings in Cypriot-based banks, including small depositors with less than €100,000 in the bank. The move is ex-

pected to raise €5.8 billion for which depositors would receive bank equity in return. Ironically, throughout the EU, deposits with less than €100,000 are insured by the state, meaning should the banks collapse before the levy is imposed, depositors’ savings - in theory - would be secured. This is the fifth aid package prepared by the troika - and the smallest - but the only one where depositors take a hit, largely due to the insistence of Germany and the IMF. The deposit levy - set at 9.9 per cent on bank deposits exceeding €100,000 and at 6.75 per cent on anything below that - will take place on Tuesday after the bank holiday on Monday. To avoid a bank run, electronic transactions were frozen while the Cooperative Movement forced its branches, which are usually open on Saturdays, to close. Apart from forcing losses on depositors, the Eurogroup, led by Dutch finance minister Jeroen Dijsselbloem and under the clear direction of his German counterpart Wolfgang Schaeuble and IMF chief Christine Lagarde, also secured an increase in Cyprus’ corporate tax rate by 2.5 per cent to 12.5 per cent, and an increase in the tax on interest on savings by 20-25 per cent. The euro ministers argued

People were queuing up outside ATMs islandwide all day to take out what they could this should boost revenues, limit the size of the loan needed from the eurozone and keep down public debt. “The solution chosen may be painful, but it was the only one that would allow us to continue our lives without adventures. It’s a decision that leads to the historic and permanent rescue of our economy,” Anastasiades said in a written statement. The president highlighted that the Cypriot delegation was caught unawares, finding itself before a fait accompli during the extraordinary Eurogroup meeting on Friday

night. “We faced decisions that had already been taken and came across faits accomplis through which we were faced with the following dilemmas: “On Tuesday, March 19, we would either choose the catastrophic scenario of disorderly bankruptcy or the scenario of a painful but controlled management of the crisis, which would put a definitive end to the uncertainty and restart our economy.” Anastasiades said the consequences of rejecting the deal would be the collapse of the Popular Bank because the Eu-

ropean Central Bank had already decided to cut its emergency liquidity while Bank of Cyprus would not have been able to avoid the same fate. “This would have lead 8,000 families to unemployment from one moment to the next,” the president said. A collapse of the banking sector could have led to an exit from the eurozone and a devaluation of the island’s currency by at least 40 per cent, he said. Never mind the lost deposits and the billions that the state

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