|Cyprus has announced it will relax citizen requirements for foreigners, including bank depositors who lost large amounts of money in the deal with the European Union and the International Monetary Fund (IMF).
President says foreign depositors who lost at least $3.9m due to EU-IMF bailout are eligible to apply for citizenship.
“Non-resident investors who held deposits prior” to the bailout and lost “at least 3 million euros [$3.9m] will be eligible to apply for Cypriot citizenship,” President Nicos Anastasiades told a Russian business conference in the coastal resort of Limassol on Sunday.
Cyprus was forced to wind down one major bank and impose considerable losses on large depositors in a second bank in return for $13bn in aid from the IMF and EU in a move that was devastating to both Cypriots and foreign investors.
Eurozone finance ministers approved the aid on Friday.
Anastasiades said on Sunday his cabinet would this week approve the relaxation of restrictions on citizenship in Cyprus, an EU member since 2004.
Non-resident investors who held deposits prior to March 15, when the plan to impose losses on savers was first formulated, and who lost at least three million euros would be eligible to apply for Cypriot citizenship, he said.
“We believe that a number of measures to be adopted could on the one hand mitigate to some extent the damage the Russian business community has endured,” Anastasiades said.
Other measures were also under consideration, he said, including offering tax incentives for existing or new companies doing business in Cyprus.
Anastasiades, whose centre-right government has been in power for less than two months, said countries who accused Cyprus of being a money laundering hub for businesses from countries such as Russia were being hypocrites, since those same countries were now trying to lure foreign businesses away.
Used to robust growth and a thriving financial services sector, Cyprus is now bracing itself for record unemployment and at least a 12 percent drop in output this year.
Cyprus, one of the eurozone’s smallest economies, modelled itself as a competitively taxed financial services centre with a network of treaties to avoid double taxation.
That model is now threatened by the fact that bailout conditions have left its two main banks crippled, but also forced Cyprus to increase its corporate tax to 12.5 percent from 10, which had been the lowest in the eurozone.
The bailout, first requested in June 2012, was delayed partly because of concerns expressed by eurozone states, notably Germany, that its financial sector was opaque, thus aiding money laundering.
But Cyprus was neither a money laundering hub or a tax haven, Anastasiades said.
“What saddens, I refrain from using the word angers, me deeply is that since the euro group agreement was reached, some EU partners’ businesses involved in the financial services industry have been preying upon our financial services sector, in order to encourage a relocation of funds into their economies,” he said.
He said it was an irony and an “absurd paradox” that the governments of those businesses claimed those funds were deposited and invested in Cyprus through illicit means.
“I am a firm believer in the rules of the free market, but allow me to comment on the hypocrisy of such methods,” Anastasiades said.
Source: ALJAZEERA Agencies.
Posts tagged ‘Nicos Anastasiades’
Cyprus reached a last-ditch deal with international lenders on a 10 billion euro ($13 billion) rescue plan to avoid economic meltdown, agreeing to close down its second-largest bank and inflict heavy losses on big depositors.
The agreement came hours before a deadline to avert a collapse of the banking system in fraught negotiations between President Nicos Anastasiades and heads of the European Union, the European Central Bank and the International Monetary Fund.
Without a deal, Cyprus’s banking system would have collapsed and the country could have become the first to crash out of the European single currency.
Backed by euro zone finance ministers, the plan will spare the Mediterranean island a financial catastrophe by winding down the largely state-owned Popular Bank of Cyprus, also known as Laiki, and shifting deposits below 100,000 euros to the Bank of Cyprus to create a “good bank”.
Deposits above 100,000 euros in both banks, which are not guaranteed under EU law, will be frozen and used to resolve Laiki’s debts and recapitalise Bank of Cyprus, the island’s biggest, through a deposit/equity conversion.
The raid on uninsured Laiki depositors is expected to raise 4.2 billion euros, Eurogroup chairman Jeroen Dijssebloem said.
Laiki will effectively be shuttered, with thousands of job losses. Officials said senior bondholders in Laiki would be wiped out and those in Bank of Cyprus would have to make a contribution.
An EU spokesman said no across-the-board levy or tax would be imposed on deposits in Cypriot banks, although the hit on large account holders in the two biggest banks is likely to be far greater than initially planned. A first attempt at a deal last week collapsed when the Cypriot parliament rejected a proposed levy on all deposits.
The Central Bank of Cyprus said both Bank of Cyprus and Laiki would remain shut until Thursday, while all other lenders would reopen on Tuesday, just over a week after the government ordered them to close their doors to halt a run on deposits.
The government is expected to impose restrictions on capital movement to halt a flood of money from the island, but details were not yet known.
Cyprus government spokesman Christos Stylianides said: “We averted a disorderly bankruptcy which would have led to an exit of Cyprus from the euro zone with unforeseeable consequences.”
Asked about the level of losses on uninsured depositors in Bank of Cyprus, he told state radio: “The assessment is that it will be under or around 30 percent.”
The Cyprus central bank said the agreement had also avoided the disorderly default of Laiki Bank.
Russia signalled it would back the bailout even though it would impose big losses on Russian depositors, who have billions in Cyprus banks.
President Vladimir Putin ordered officials to restructure a loan Moscow granted to Cyprus in 2011 – having rejected Nicosia’s request for easier terms in crisis talks last week.
Prime Minister Dmitry Medvedev – who ranks below Putin – earlier criticised the bailout, voiced the anger expressed by Russian depositors, saying: “The stealing of what has already been stolen continues.”
Among Cypriots, there was a mood of wariness about the deal.
“How long will it last?” asked Georgia Xenophontos, 23, a hotel receptionist in Nicosia. “Why should anyone believe anything this government says?”
But many in the capital appeared intent on enjoying a sunny holiday morning, drinking coffee at pavement cafes and watching camera crews filming people drawing money from bank machines.
German Chancellor Angela Merkel said the deal was right for Cyprus because it ensured that those who contributed to the crisis were required to pay towards its resolution.
“I am very pleased that a solution was found last night and that we have been able to avoid an insolvency,” Merkel said.
Anastasiades was due to make a live televised statement at 7 p.m (1700 GMT), on his return to Cyprus from Brussels, but the appearance was delayed.
Lefteris Christoforou, vice-chairman of the ruling Democratic Rally party, said it was important that Cyprus had avoided a chaotic bankruptcy. “It is a bad deal, but the extreme scenario we had to contend with was worse.”
A senior source in the Brussels talks said Anastasiades threatened to resign at one stage on Sunday if pushed too far.
The Conservative leader, barely a month in office and wrestling with Cyprus’s worst crisis since a 1974 invasion by Turkish forces split the island in two, was forced to abandon his efforts to shield big account holders.
Diplomats said the president had fought hard to preserve the country’s business model as an offshore financial centre drawing huge sums from wealthy Russians and Britons but had lost.
The EU and IMF required that Cyprus raise 5.8 billion euros from its banks towards its own rescue in return for 10 billion euros in international loans. The head of the EU rescue fund said Cyprus should receive the first emergency funds in May.
IMF chief Christine Lagarde said the agreement was “a comprehensive and credible plan” that addresses the core problem of the banking system.
“This agreement provides the basis for restoring trust in the banking system, which is key to supporting growth,” she said in a statement.
With banks closed for the last week, the Central Bank of Cyprus imposed a 100-euro daily limit on withdrawals from cash machines at the two biggest banks to avert a run.
The euro gained against the dollar on the news in early Asian trading.
Analysts had said failure to clinch a deal could have caused a financial market sell-off, but some said the island’s small size – it accounts for just 0.2 percent of the euro zone’s economic output – would have limited contagion.
Cyprus’s banking sector, with assets eight times the size of the economy, has been crippled by exposure to Greece, where private bondholders suffered a 75 percent “haircut” last year.
Without a deal by the end of Monday, the ECB said it would have cut off emergency funds to the banks, spelling certain collapse and potentially pushing the country out of the euro.
Under the bailout agreement, Laiki’s ECB funds will pass to Bank of Cyprus, and the central bank will “provide liquidity to BoC in line with applicable rules”.
The tottering banks held 68 billion euros in deposits, including 38 billion in accounts of more than 100,000 euros – enormous sums for an island of 1.1 million people that could never sustain such a big financial system on its own. ($1=0.7694 euros)
© 2013 Thomson/Reuters. All rights reserved.
Cypriot President Nicos Anastasiades, seeking a last-minute reprieve from financial meltdown at talks in Brussels on Sunday, has a “very difficult task” ahead of him if he is to save the island’s economy, a government spokesman said.
With Cyprus facing a Monday deadline to avert a collapse of its banking system and potential exit from the euro, late night talks in Nicosia to seal a bailout from the EU and International Monetary Fund broke up without result.
Anastasiades then headed to Brussels in a private jet sent by the European Commission to continue the talks ahead of a crunch meeting of eurozone finance ministers.
The president and his team have a “very difficult task to accomplish to save the Cypriot economy and avert a disorderly default if there is no final agreement on a loan accord,” the spokesman said.
Underlining the gravity of Cyprus’ position, the EU’s economic affairs chief said there were now “only hard choices left” for the latest casualty of the eurozone crisis.
After negotiations ended in the early hours of Sunday morning, the government issuing a statement saying talks were at “a very delicate phase” and deadlines were very tight.
The Cyprus government’s tone jarred with earlier expressions of cautious optimism during days of intense negotiations between Cypriot leaders and officials from the island’s “troika” of international lenders, the EU, IMF and European Central Bank.
Cyprus’ overgrown banking sector has been crippled by exposure to crisis-hit Greece, and the EU says the east Mediterranean island must raise 5.8 billion euros on its own before it can receive a 10 billion euro bailout.
Without a deal on Monday, the ECB says it will cut off emergency funds to Cypriot banks, spelling certain collapse and potentially pushing the country out of the eurozone.
Conservative leader Anastasiades, barely a month in the job and wrestling with Cyprus’ worst crisis since a 1974 invasion by Turkish forces split the island in two, is expected to meet the heads of the EU, the European Central Bank and IMF in Brussels.
Scrambling to find the funds, officials said Cyprus had conceded to a one-time levy on bank deposits over 100,000 euros, a dramatic U-turn from five days ago when lawmakers angrily threw out a similar proposal as “bank robbery.”
A senior Cypriot official said Nicosia had agreed with its lenders on a 20 percent levy over and above 100,000 euros at the island’s largest lender, Bank of Cyprus, and four percent on deposits above the same level at other troubled banks.
‘ONLY HARD CHOICES LEFT’
Finance Minister Michael Sarris spoke of “significant progress” in talks on Saturday, as angry demonstrators outside the finance ministry chanted “resign, resign!”
The EU’s Economic Affairs Commissioner, Olli Rehn, said progress was being made, but warned of tough times ahead.
“Unfortunately, the events of recent days have led to a situation where there are no longer any optimal solutions available,” he said on Saturday. “Today, there are only hard choices left.”
In a stunning vote on Tuesday, Cyprus’s 56-seat parliament rejected a levy on depositors, big and small, and Sarris spent three fruitless days in Moscow trying to win help from Russia, whose citizens have billions of euros at stake in Cypriot banks.
Rebuffed by the Kremlin, Sarris said the levy was back “on the table”.
On Friday, lawmakers voted in late-night session to nationalize pension funds and split failing lenders into good and bad banks – a measure likely to be applied to the second-biggest lender, the largely state-owned Cyprus Popular Bank, also known as Laiki.
Cypriot media reports suggested talks were stuck on a demand by the IMF that Bank of Cyprus absorb the good assets of Popular Bank and take on its nine billion euros debt to the central bank as well.
The reports said the Cypriot government was resisting.
A Cypriot plan to tap pension funds had already been shelved, a senior Cypriot official told Reuters, under opposition from Germany, which had warned the measure might be even more painful for ordinary Cypriots than a deposit levy.
It was also far from certain that a majority of lawmakers would back a revised levy, or whether the government might even try to bypass the assembly.
Ordinary Cypriots have been outraged by the levy and stunned at the pace of the unfolding drama. They elected Anastasiades in February on a mandate to secure a bailout and save banks whose capital was wiped out by investments in Greece, the epicenter of the eurozone debt crisis.
RUN ON BANKS
For the past week they have been besieging cash machines ever since bank doors were closed on the orders of the government to avert a massive capital flight. Anticipating a run on banks when they reopen on Tuesday, parliament has given the government powers to impose capital controls.
On Saturday, some 1,500 protesters, many of them bank workers, marched on the presidency, holding banners that read, “No to the bankruptcy of Cyprus” and “Hands off workers’ welfare funds”.
The levy on bank deposits represents an unprecedented step in Europe’s handling of a debt crisis that has spread from Greece, to Ireland, Portugal, Spain and Italy.
Cypriot leaders had initially tried to spread the pain between big holdings and smaller depositors, fearing the damage it would inflict on the country as an offshore financial haven for wealthy foreigners, many of them Russians and Britons.
The tottering banks hold 68 billion euros in deposits, including 38 billion in accounts of more than 100,000 euros – enormous sums for an island of 1.1 million people which could never sustain such a big financial system on its own.
© 2013 Thomson/Reuters. All rights reserved.
Cyprus was just hours away from a deal on Friday to raise billions of euros and unlock a bailout from the European Union that could avert financial meltdown and exit from the euro, its ruling party said.
The remarks from the deputy leader came after Moscow had rebuffed requests from Nicosia for assistance to save Cypriot banks in which Russians have billions of euros at risk.
He gave little detail beyond saying Cyprus was close to a compromise that would let parliament reverse its rejection of a rescue package offered by euro zone partners a week ago under which holders of bank deposits would suffer losses.
“There is cautious optimism that in the next few hours we may be able to reach an agreed platform so parliament can approve these specific measures which will be consistent with the approach, the framework and the targets agreed at the last Eurogroup,” Averof Neophytou, deputy leader of President Nicos Anastasiades‘s Democratic Rally, told reporters in the capital.
Germany warned Cyprus it was “playing with fire” but also kept up pressure by saying the euro zone was well able to contain any crisis – sticking to a threat to cut Cyprus off.
With the clock running down to a Monday deadline set by the European Central Bank when it will sever essential cash flows to Cypriot banks if no bailout programme is agreed, Cyprus took a first step toward financial consolidation by arranging for the takeover of big Greek units of its banks by a Greek competitor.
Shares in Piraeus Bank in Athens shot up 20 percent before officials confirmed Piraeus would take control of the Greek units of Bank of Cyprus and Cyprus Popular Bank, two big retail lenders badly burned by exposure to Greece’s own troubles.
Euro zone leaders, led by Germany, have offered Cyprus 10 billion euros ($13 billion) on condition it raises 5.8 billion of its own. A plan to fund that by taxing deposits – breaking what had hitherto been a taboo in efforts to stabilise the currency bloc – had led to parliament throwing out the deal.
EU officials criticised Cyprus for insisting on taxing even small savers whose deposits up to 100,000 euros benefit from a state guarantee – a measure Cypriot leaders favoured in order to limit the losses for bigger depositors, many of them Russian and seen as vital to the future viability of the Cypriot economy.
Hopes of favour from Moscow were disappointed on Friday.
Cypriot Finance Minister Michael Sarris left for home after failing to renegotiate a 2.5-billion euro loan from the Russian government, win new financing or lure Russian investors to Cyprus’s banks and gas reserves.
The Bank of Cyprus urged the government to go back and make a deal with the EU, under which larger deposits over 100,000 euros, would be taxed. It was preferable, it said, to a collapse of the system and a return to the Cypriot pound which would wipe out assets. “There must be no further delay,” the bank said.
EU leaders, notably Germans who face an election in six months, have been reluctant to give up on the bank levy since it protects them from accusations of using European taxpayers money to bail out big Russian investors in Cyprus.
While this had raised concern that it might erode confidence in banks in other, bigger euro zone states, notably Spain and Italy, the leaders of the euro zone have made clear they believe they can contain any damage, even it Cyprus is forced into a bankruptcy that would lead to it abandoning the euro.
German Finance Minister Wolfgang Schaeuble said on Friday that muted reactions to the crisis in financial markets showed the euro zone was able to contain the Cyprus problem.
On the island, lawmakers and banking officials were locked in talks inside parliament. Hundreds of angry Cypriots faced off with riot police outside.
On the table are proposals to nationalise pension funds, pool state assets and split Popular Bank in a desperate effort to satisfy exasperated European allies.
There were persistent rumours of a possible U-turn on the bank levy, targeting only big depositors with over 100,000 in Cypriot banks, many of them foreigners including Russians.
“PLAYING WITH FIRE”
Everything is subject to the approval of Cyprus’s lenders at the EU, ECB and International Monetary Fund.
The head of the Eurogroup of euro zone ministers, Dutchman Jeroen Dijsselbloem, said it was focused on keeping Cyprus in the euro zone. Asked whether Cyprus’s exit from the euro zone was inevitable, he did not rule it out, however:
“All kinds of scenarios are possible and the scenarios we’re focusing on are to come to a joint solution in which Cyprus is saved but in which the banking sector continues in a smaller but healthier form.”
Germany had rejected a proposal to nationalise pension funds and demanded Cyprus take an axe to its banks.
Chancellor Angela Merkel told lawmakers that while she wanted to keep Cyprus in the euro zone, the country must first recognise it had no future as an offshore financial centre for wealthy Russians and Britons, two parliamentarians told Reuters.
Cypriots have been stunned by the pace of the unfolding drama, having elected conservative President Nicos Anastasiades barely a month ago on a mandate to secure a bailout.
Depositors, who have been besieging bank cash machines all week, queued again on Friday to withdraw what they could.
“Our so-called friends and partners sold us out,” said Marios Panayides, 65, a protester at the parliament. “They have completely abandoned us on the edge of an abyss.”
© 2013 Thomson/Reuters. All rights reserved.
Cyprus’ second largest bank has stopped customers withdrawing more than 260 euros (£221) a day from cash machines, as MPs try to reach a deal to save the country’s economy.
The announcement came as the central bank said it had proposed a restructuring of the heavily indebted banking sector, including measures to prevent the Popular Bank, or Laika, going bankrupt.
“This consolidation process will prevent the risk of bank failures and protect in their entirety all insured deposits up to the amount of 100,000 euros ($129,000),” central bank governor Panicos Demetriades said.
“It also creates conditions for the recovery of the banking system and guarantees jobs.”
Earlier, as long queues formed as cash machines at Popular Bank branches across the island, the central bank was forced to deny rumours it was to be closed down.
Banks in Cyprus closed their doors last Friday and will remain shut until next Tuesday amid fears that the country’s financial crisis could prompt a run on the banks.
However, many customers have begun to fear that the troubled Popular Bank will never re-open.
“I’ve been to five ATMs, looking for the one with the smallest queue. The others had really long queues, at least 40 or 50 people,” Peter Larkin, a Nicosia resident waiting in line with his five-year-old daughter, said.
“There’s a lot of rumours that Laiki is going to go bankrupt and that (their ATMs) will stop giving out money.”
The Popular Bank said it was the high demand for cash that had forced them to reduce the amount customers could take out from 700 euros.
The bank’s employees staged an angry protest outside parliament amid the uncertainty, at one point breaking through a police cordon around the building.
Sky’s Ashish Joshi, reporting from outside parliament, said: “They are afraid about losing their jobs.
“The word has got out that the banks might be sacrificed in some shape or form for Cyprus to come up with its obligation.”
The island’s banking sector could face collapse if a new bailout bill is not agreed, following parliament’s rejection of a one containing a levy on all bank accounts in the country.
Parliament was due to vote on Thursday evening on a ‘Plan B’ to raise the 5.8bn euros (£4.9bn) Cyprus needs to contribute if it is to get the 10bn euros (£8.5bn) from eurozone partners and the IMF.
Earlier, party leaders agreed to set up an “Investment Solidarity Fund” to gather contributions from ordinary Cypriots, businessmen and foreign investors in a an attempt to raise the cash.
The country’s largest bank, the Bank of Cyprus, has appealed for MPs to pass a bailout deal.
“The Cyprus economy is on the brink and in a fragile state. The next move may prove its salvation or destruction,” the bank said in a statement.
The European Central Bank (ECB) has said it will only guarantee assistance until Monday night without a new aid programme being in place.
Source: YAHOO NEWS.
The 56-seat legislature buried the bill with 36 votes against and 19 abstentions. One member of parliament was not present.
The seizure of savers’ deposits, in return for shares in the lenders, was meant to raise 5.8bn euros (£4.96bn), towards the country’s financial rescue.
But outrage from Cypriots and the impact on international markets had already apparently pushed politicians to consider an exemption for smaller savers.
The draft bill being discussed in parliament was believed to suggest a 6.75% tax on all savings between 20,000 and 100,000 euros and 9.9% on all savings over 100,000 euros.
But even that was dismissed after the ruling party tried to delay the vote for a day before deciding not to take part.
Opposition member Pambos Papageorgiou told Sky News: “We were asked to legitimise the confiscation of savings, that has never happened anywhere in the world.
“It would have set a very dangerous precedent for the whole of Europe. Don’t forget that for the whole of Europe there is a law protecting up to 100,000 euros in terms of savings.”
Outside parliament, thousands of protesters gathered holding up banners reading “Hands Off Cyprus” and chanted: “It will not pass.”
When the bill was rejected they cheered and sang the national anthem.
EU countries said before the vote that they would withhold 10bn euros (£8.5bn) in bailout loans unless depositors in Cyprus shared the cost of the rescue.
However, amid the backlash against the plan to hit all savers, eurozone finance ministers had pushed Nicosia to only target accounts with more than 100,000 euros.
The European Central Bank said after the vote it was still committed to providing liquidity to Cyprus’ cash-strapped banks within “existing rules”.
Banks have been closed since before the weekend in order to prevent a run on them and were not due to reopen until Thursday.
Nicholas Papadopoulos, the chairman of the parliamentary finance committee, said banks would now stay shut “for as long as we need to conclude an agreement”.
He stressed this would be “in the next few days”.
Meanwhile, a British military plane has arrived in Cyprus with one million euros onboard to ensure soldiers have access to cash during the crisis.
British soldiers stationed on the island and their families would be able to borrow from the money if cash machines and debit cards in Cyprus stop working completely, the Ministry of Defence said.
“We’re determined to do everything we can to minimise the impact of the Cyprus banking crisis on our people.”
Around 2,500 to 3,000 British military personnel are currently stationed in Cyprus.
Chancellor George Osborne has already pledged that military personnel and civil servants would be protected from the levy, telling Cabinet they would be “compensated in full” for any losses.
Earlier it was reported that Cyprus’ finance minister had resigned amid the fallout from the original proposal, but Reuters said Michael Sarris had told them by text message that there was “no truth” to the story.
He has flown to Moscow to seek Russian financial assistance for the island.
President Nicos Anastasiades is due to meet party leaders on Wednesday morning in an attempt to find a way forward.
Source: YAHOO NEWS.
Athens is “ready” to absorb the subsidiaries of three Cyprus banks active in Greece, the Greek finance minister said as the eurozone sought to amend a controversial levy on the island nation’s bank deposits.
Cypriot bank subsidiaries in Greece are exempt from the levy, Stournaras added.
Greek stocks dropped 2.87 percent in midday trade on Tuesday with bank shares down 5.56 percent.
A Greek banking source said “around a billion euros” would be required to finance the takeover for the three subsidiaries which have deposits of around 14.6 billion euros ($18.9 billion) in Greece.
Greece’s top three banks and the state-owned postal bank have all expressed interest in a possible purchase, the source told AFP.
But further developments depended on a crucial vote on the bailout by the Cypriot parliament as the island’s bankers were “reluctant” to sell, the source said.
Under the original terms of a 10-billion euro ($13 billion) bailout package from the eurozone, all holders of bank accounts in Cyprus were to be hit by a one-off levy ranging from 6.75 percent to 9.9 percent.
On Tuesday, French Finance Minister Pierre Moscovici said the eurozone had “unanimously” agreed to scrap the controversial levy on deposits below 100,000 euros for a bailout to the debt-hit nation.
All Cypriot subsidiaries in Greece were closed on Tuesday — the first day of business after a religious holiday on Monday.
The Athens stock exchange said it had also temporarily suspended trading in Bank of Cyprus and CPB shares.
The upheaval came just a few days after newly-elected Cyprus President Nicos Anastasiades visited Greece last week to reportedly request financial assistance.
As part of its own EU-IMF rescue package reached last year, Greece obtained a partial reduction in debt owed to private creditors — which included Cypriot banks.
Anastasiades’ incoming administration wanted this taken into account during talks with international creditors for the Cypriot bailout.
At the time, Cyprus media reports had said Anastasiades would ask Athens to offer the recession-hit island up to three billion euros to help bail out its banks and ease the expected EU financial aid package.
Cypriot daily Phileleftheros had said this could be done by ring-fencing operations in Greece by Cypriot lenders so they could then receive Greek rescue cash.
Source: YAHOO NEWS.