The Cyprus parliament is to hold an emergency session over a controversial deal to tax savers as part of a €10bn (£8.6bn) bailout agreed by the European Union and the International Monetary Fund.
The deal, struck early on Saturday, would see a 6.75 per cent levy imposed on all deposits under €100,000 and a 9.9 per cent levy on deposits over €100,000.
The Financial Times reports Cyprus’ president Nicos Anastasiades was locked in talks yesterday to ease the terms for smaller deposit holders, with sources telling the newspaper a revised deal is being discussed to shift more of the burden onto those with deposits larger than €100,000.
Cypriot officials have told the FT it would not be possible to exclude smaller depositors from the levy altogether as 35 per cent of all deposits are below the threshold, so exempting them would mean a punitive rate for other deposit holders.
The Cyprus president needs to secure the approval of other parties for the deal to be ratified. If not, it has been suggested banks could impose a bank holiday tomorrow in addition to the normal public holiday in Cyprus today, to avoid mass withdrawals. There have already been heavy cash withdrawals over the weekend.
The BBC reports depositors will be compensated with the equivalent amount in shares in their banks. Savers who keep their deposits in Cypriot banks for the next two years will be given bonds linked to revenues from natural gas.
It has been suggested that eurozone leaders, particularly in Germany, insisted on the levy due to the large amount of Russian capital kept in Cypriot banks, amid fears of money laundering.
Chancellor George Osborne has said the UK would compensate any Government employees and military personnel whose bank accounts were affected.
But according to the Mail on Sunday, a further 60,000 Britons, including holiday homeowners and ex-pats, will lose out from the levy.
It reports there is thought to be about £1.7bn in Cyprus’ banks held by Britons, which would equate to a potential levy of at least £115m or an average of £1,900 each.
In a television address over the weekend President Anastasiades said Cypriots should accept the levy as the “least painful solution”.
He said: “Cyprus is in a state of extreme emergency. These are the most tragic events we have faced since 1974.
“This solution is not what we wanted . . . but it leaves the running of the economy in our hands. And it opens the road to recovery and prosperity.”