Cyprus leader backs savings tax

President seeks to amend plan but urges passage

Depositors have swamped ATMs in Cyprus to withdraw savings before a tax is enacted.
Petros Karadjias/Associated Press
Depositors have swamped ATMs in Cyprus to withdraw savings before a tax is enacted.

NICOSIA, Cyprus — Cyprus’ president said Sunday he is trying to amend an unpopular eurozone bailout plan that would tax deposits in the country’s banks.

But in a nationally televised speech, President Nicos Anastasiades also urged lawmakers to approve the tax in a vote Monday, saying it is essential to save the country from bankruptcy. Some 25 lawmakers in the 56-seat Cypriot Parliament said they wouldn’t vote for the tax amid deep resentment over a move some called disastrous.

In particular, they cite the tax’s effect on small savers.


Monday is a national holiday in Cyprus.

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‘‘I completely share the unpleasant sentiment that this difficult and onerous decision has caused,’’ Anastasiades said. ‘‘That’s why I continue to give battle so that the decisions of the eurozone are amended in the next hours to limit the effect on small depositors.’’

In exchange for $13 billion in rescue money, creditors would impose a one-time tax of 6.75 percent on all bank deposits under $131,000 and 9.9 percent above that amount. The decision Saturday spurred anxious depositors to rush to ATM machines to withdraw as much of their money as they could.

Anastasiades did not say what he meant by ‘‘small depositors,’’ but they would certainly fall among those with less than $131,000 in the bank.

The deposit tax is part of a bailout agreement reached after talks by finance ministers from euro countries and representatives of the International Monetary Fund and the European Central Bank.


The Cypriot bailout follows those for Greece, Portugal, Ireland, and the Spanish banking sector, but it is the first one that dips into people’s savings to finance a bailout. Analysts fear the move could roil international markets and jeopardize Europe’s fragile economies.

Officials in Spain and Italy tried during the weekend to reassure their citizens by saying the case in Cyprus is unique, and that bank deposits in their countries will remain safe.

In Cyprus, the levy — which also would hit wealthy Russian depositors who have put vast sums into Cyprus’ banks in recent years — is expected to raise $7.58 billion to recapitalize the nation’s banks and service the country’s debt. Cypriot banks got into trouble when they lost $5.8 billion on their Greek government bond holdings after eurozone leaders wrote down Greece’s debt last year.

Anastasiades, who only assumed the Cypriot presidency March 1, explained why he had changed his position and consented to the taxes. He had vehemently rejected any idea of going after deposits to help pay for a bailout during the campaign and after his election.

‘‘The solution that we have reached is certainly not the one we wanted, but it is the least painful under the circumstances because above all it leaves the management of our economy in our own hands,’’ Anastasiades said Sunday.


He said the tax would only be as much as the interest collected on deposits during two years and stressed that it would only occur once because it would ensure the bailout would not push the country’s debt to unsustainable levels.

He said pension and provident funds will remain untouched, and there would not be any need for further salary and pension cuts, or an earlier demand by creditors for a financial transaction tax, which would have damaged Cyprus’ financial services-driven economy.