Cyprus is the latest country joining the list with Greece, Ireland, Portugal and Spain to receive a bailout. While Cyprus only makes up 0.2 per cent of the Eurozone economy and the bailout is worth 10 billion euros, it is making news headline around the world for its unprecedented ‘levy’ on deposit holders.
Deposit holders with less than 100,000 euros will be hit with a once off tax at 6.75 per cent, while those with over 100,000 will contribute a higher 9.9 per cent.
The announcement has sparked outrage with everyday citizens, queuing to withdraw their life savings. However, it is believed the government has frozen electronic transfers until Tuesday so the levy can be processed on the Monday public holiday.
The ounce of logic for this unprecedented decision comes about as almost half of the depositors are foreign, many wealthy Russians. In addition to the Eurozone bailout, Russia is planning to extend a loan of 2.5 billion euro by five years.
But this is no consolation for Cyprus citizens who will wake up Tuesday morning poorer, some losing as much as 10 per cent of their life savings. In a world economy where we should be encouraging prudence, this decision will undermine any belief in saving, and could have wide spread implications.
» Why today’s Cyprus bailout could be the start of the next financial crisis – The Washington Post, 16th March 2013.
» Cyprus’ savers bear brunt of eurozone bailout – The ABC, 17th March 2013.
» Cyprus shellshocked over eurozone bailout – The Sydney Morning Herald, 17th March 2013.
» Cyprus set for emergency parliamentary session over bailout – The Australian, 17th March 2013.
» Cyprus bailout comes at a cost to bank depositors – MarketWatch, 16th March 2013.
» Cyprus bailout: Man threatens bank with bulldozer – The BBC, 16th March 2013.