CYPRUS MAIL

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Cyprus Mail www.cyprus-mail.com

Tuesday, March 19, 2013

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WORLD

INSIGHT

SPORT

Pope asked to intervene in Falklands row

The Cyprus bailout deal nobody wanted

Comeback king Nadal sets his sights on Paris

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Eurogroup throws the ball back at us Euro ministers want to spare smaller savers, but hit richer harder By Stefanos Evripidou

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UROZONE FINANCE ministers last night urged Cyprus to protect small savers’ deposits while still coming up with €5.8 billion from a deposit levy so the island’s €10 billion bailout could go ahead. The Eurogroup appeared to show flexibility on the details of how Cyprus should implement the unprecedented haircut on bank deposits, following the blowback caused by its decision last Saturday to take 6.75 per cent from insured depositors with under €100,000 in a Cyprus-based bank, and 9.9 per cent from deposits over that amount. The Cyprus deal sent shockwaves through financial markets yesterday, with shares, the euro and the bonds of southern eurozone countries sliding. Uncertainty reigned as a Cypriot parliamentary vote on Saturday’s deal was postponed twice - from Sunday to Monday and then to Tuesday - with the government nowhere near certain of winning a majority vote. The ongoing confusion led the Central Bank to announce yesterday that all banks will be closed today and tomorrow, likely in fear of a depositor’s bank run. Ahead of a plenary session in the legislature, scheduled for 6pm today, the eurozone’s finance ministers held a teleconference call for one and a half hours last night to take a second look at their initial decision. According to Reuters, the EU finance ministers said they favoured a higher, 15.6 per cent hit for richer savers

so more modest accounts could be spared. Various reports suggest it was exactly this kind of deal that the Cypriot delegation in Brussels rejected at the weekend, fearing the destruction of their banking model which lures money from rich Russians and others. It was not clear if Nicosia will accept it now but if it does, it would still need to raise €5.8 billion from the bank levy as planned, a Greek finance ministry source said, as well as get the levy passed through parliament. “All Eurogroup ministers said (last night) they wished there was no tax below €100,000 but you can’t force a country to not do that,” the Greek source told Reuters. “Cyprus doesn’t want to impose a large tax above €100,000 because the money will flow out. Two thirds of deposits are from abroad,” he added. Eurogroup President Jeroen Dijsselbloem released a statement after the teleconference recalling that the weekend’s controversial decision was the product of “consensus” between the Cypriot government and the Eurogroup.” He reiterated that the stability levy on deposits is a “oneoff measure” to restore the viability of the Cypriot banking system and safeguard financial stability in Cyprus, adding that without it, deposit holders would be “significantly worse off”. “The Eurogroup continues to be of the view that small depositors should be treated differently from large depositors and reaffirms the importance of fully guaranteeing

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Irate demonstrators outside the House of Representatives yesterday. FULL STORY PAGE 4

(CNA)

Russia wants future involvement on Cyprus after ‘dangerous’ levy By Lidia Kelly and Alexei Anishchuk A LACK of coordination with Russia in future on Cyprus could affect a decision by Moscow on restructuring its €2.5 billion euro loan to the island, the Russian finance minister said yesterday. Russian President Vladimir Putin branded as “dangerous” a weekend decision by the European Union to impose a levy on Cypriot bank accounts as part of a €10 billion bailout. The EU agreed the move without involving Russia which has strong financial ties with the country. Russians account

for much of the billions of euros held in Cypriot banks by foreign depositors and its banks are heavily exposed to the island. As part of a package of support for Cyprus, EU officials expect Russia to extend its existing loan by five years and refinance terms. But Moscow was frustrated that it was not consulted on the levy proposal. “We had an agreement with colleagues from the eurozone that we’d coordinate our actions (on Cyprus),” Finance Minister Anton Siluanov told Reuters. “So, we will consider the issue of restructuring of the loan taking into account our (future) participation in the coordinated

actions with the European Union to help Cyprus.” Amongst the host of calls for alternative measures to be taken over the weekend was that of an alleged counterproposal by Russian giant Gazprom. Reports claimed that in exchange for financial support, Gazprom would be given the right to extract natural gas from Cyprus’ exclusive economic zone. Those reports were denied, both by Gazprom spokesman, Sergey Kupriyanov, and Government Spokesman, Christos Stylianides. “Reports of a deal are not correct,” Stylianides said yesterday.

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