Cypriots Reel After Euro Finance Ministers Choose Deposit Losses
Cyprus President Nicos Anastasiades was in Brussels today after missing his return flight from a summit of European Union leaders. Anastasiades, less than a month in the job, won’t return to a hero’s welcome.
“I feel betrayed by this president,” said Andreas Andreou, a 48-year-old public servant. “We voted for him to save us and instead he’s disappointed us.”
Euro-area finance ministers meeting in Brussels yesterday and in the early hours of today agreed to tax bank deposits in Cyprus as part of a 10 billion-euro ($13 billion) bailout mostly aimed at saving the country’s troubled banks. It’s the first euro area rescue to involve depositor losses.
Cyprus will impose a levy of 6.75 percent on deposits of less than 100,000 euros and 9.9 percent above that. The measure, which is aimed at raising 5.8 billion euros, means a smaller bailout for the east Mediterranean island nation than the as much as 17.5 billion euros envisioned at one point.
“I want to reiterate we had to decide between painful decisions,” Finance Minister Michael Sarris said in Brussels after the meeting. “And I believe to the benefit of Cyprus, all depositors in this and the next generation, we chose the least painful decision. Cyprus’s problem was different to the others in the mechanism.”
Cyprus in June became the fifth euro-area nation to request a rescue, after Greece’s debt restructuring trashed the financial health of lenders including Bank of Cyprus Plc and Cyprus Popular Bank Pcl (CPB), the nation’s two biggest.
Anastasiades, 66, was elected Cyprus’s president on Feb. 24 on a promise to revive bailout talks that had stalled, while refusing to accept losses for depositors. He was backed by German Chancellor Angela Merkel, who in a show of support flew to Cyprus for a European People’s Party meeting on Jan. 11.
In the coastal city of Limassol, where the EPP meeting was held, a man drove a bulldozer into a bank branch in protest at today’s decision, according to images broadcast on state-run CYBC.
The president of the Cypriot Parliament, Yiannakis Omirou, said on CYBC that he spoke with Sarris, who requested an emergency session to vote on legislation related to bailout. Parliament could convene as soon as tomorrow, he said.
“Anastasiades and his government have shown themselves unable to protect our national interest,” said George Lillikas, who came third in Cyprus’s presidential vote election.
He proposed that Cyprus hold a referendum on whether to accept the bailout or go back to the polls to hold early elections. He said that thought should be given to Cyprus leaving the European single currency, which it joined in 2008.
The president has called a meeting of political party leaders for 11 p.m. this evening, after he returns to Cyprus, CYBC said, without saying how it got the information.
At a branch in the capital Nicosia of one of Cyprus’s cooperative banks, which would normally be open today, a sign said that it was shut on instructions from the Central Bank of Cyprus. Nicos Nicolaou, 57, said he hoped his deposits would not be affected.
“All my life I never had deposits in banks because I didn’t trust them,” he said. “I only worked with co-ops.”
While cooperative bank ATMs are open, some have run out of cash, General Manager of the Cooperative Central Bank Erotokritos Chlorakiotis said in comments broadcast on CYBC. The machines are being supplied with cash, and customers can withdraw savings up to the limit they’ve determined, he said.
Cyprus Popular’s board will meet later today to discuss its management of the crisis, press officer Costas Archimandrites said by phone from Nicosia today. Calls to Bank of Cyprus’s investor relations department were unanswered.