Cyprus' New Gambit: Spare Smallest Savers

Government rep says the levy will still likely die

By Rob Quinn,  Newser Staff

Posted Mar 19, 2013 3:33 AM CDT | Updated Mar 19, 2013 7:43 AM CDT

(Newser) – The proposed bank deposit tax that has enraged Cypriots and spooked bank customers across Europe looks likely to die today, even with a last-minute tweak that would spare the smallest savers, Reuters reports. Draft legislation sent to parliament amends the previous plan by exempting accounts containing less than about $26,000 from the tax, reports the Wall Street Journal. The other levies—6.75% on all deposits under $131,000 and 9.9% over that amount—would not be raised to make up for the lost revenue, meaning the levy wouldn't generate the $7.6 billion required by the IMF and eurozone partners, notes Reuters. Still, a government rep says parliament remains unlikely to pass the levy even with the change, and could punt on a vote if it becomes clear there's no chance of passage. Meanwhile, the island's banks will not reopen until Thursday at the earliest, CNN reports.

EU officials insist that there is no chance of a similar levy being imposed on other nations, but the Cyprus mess has raised fears of bank runs in other countries. "If you're a small depositor in Cyprus, you'll tell yourself that it would have been better to keep your money under the carpet than in a bank," says a French bank executive. "And if you're a Greek, a Spaniard, or an Italian, well, you'll tell yourself that you might be next." This isn't the first time European countries have moved to tax bank deposits, the AP adds. Italy imposed a tax on all bank accounts to keep its currency afloat in the '90s, but the rate was just 0.06%.

Protesters hold up their hands as they protest outside the parliament in Nicosia, Cyprus yesterday.   (AP Photo/Petros Karadjias)
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