Cyprus Proposes Exempting Smaller Deposits From Tax
Originally published on Tue March 19, 2013 9:42 am
RENEE MONTAGNE, HOST:
Lawmakers in Cyprus are trying to ease rage over a proposed tax on all bank deposits by exempting people who have relatively small accounts. It's part of a bailout plan for that Mediterranean country negotiated with the E.U. and IMF over the weekend, but the compromise on taxes may not be enough for Cyprus' parliament to pass the plan.
It's the first time in the euro crisis that people's savings are being used to help finance a bailout, and that's causing not only panic in Cyprus, but also the eurozone and Russia, which has billions in deposits. It's the subject of today's Bottom-line in Business.
For more, we're joined by reporter Joanna Kakissis in Athens.
Good morning, Joanna. And let me just start with what the government there in Cyprus is doing to calm people down over this tax.
JOANNA KAKISSIS, BYLINE: Well, today, they're talking about exempting those people who make $20,000 euros - which is about $26,000 - from the tax. So they wouldn't pay anything at all. And this is - the idea for this is to just get people off the idea that, oh, my God. This is highway robbery. This is legalized robbery, and we have to find a way to stop it. There's a lot of opposition to the tax.
However, it does still stand that people who have more than 100,000 euros in the bank, that they'll still have to pay at least 7 percent on it.
MONTAGNE: Of course, if the parliament there in Cyprus does approve it. But talking about those people who have more money in the bank, talk to us about this - the Russian deposits. It's an enormous sum - $30 billion, I gather.
KAKISSIS: Yeah, that's correct. I mean, Russian investors have had decades of history in Cyprus. They've been bringing in their money to the island for a long time. And so they're very freaked out at the prospect of losing what could amount to a lot of money.
And so, you know, President Vladimir Putin called the law dangerous, and he's been very vocal against it. His government has been very vocal against it. But, you know, Russians - if Russians pull their money out of Cyprus, Cyprus is going to have a huge problem, not only in terms of capital, but in terms of their banks. I mean, their banks are going to be in a lot of trouble if the Russians just leave. And in - business-wise, they can't lose the Russians, either. They're a very, very important relationship for the Cypriots.
So Germany is providing most of the bailout loans. So because they are the, essentially, the paymaster in this bailout, they're very concerned about what they're - who they're bailing out. And in this case, they don't want to be bailing out Russian oligarchs. And that's how they view Russian investors at this point, because Cyprus is viewed as an offshore haven for investors, including Russians. So the German taxpayers are saying: Why would should we bail out some rich Russian billionaire with a seaside home in Cyprus when we have problems of our own, and when there are people who are more important than him?
MONTAGNE: So, Cyprus had a bank holiday. It's declared until Thursday. What will stop people from panicking as soon as banks open?
KAKISSIS: What the president of Cyprus, Nicos Anastasiades, has offered is essentially a bond link to revenue from natural gas reserves. And they've been discovered offshore in - offshore of Cyprus - off the coast of Cyprus fairly recently. And these could be potentially very, very lucrative, because the country could make billions off these - off the natural gas reserves.
And so what he's saying, essentially, is, look. Stick with me. This is the right course. If you keep your money in our banks for the next two years and don't take them out, you will get it back, and you'll get back a lot more than you had in the first place.
It's a way to try to keep people calm and committed to the policy that Cyprus is trying to put forth, however flawed it is.
MONTAGNE: Joanna Kakissis, speaking to us from Athens. Thanks very much.
KAKISSIS: Thank you. Transcript provided by NPR, Copyright NPR.