November 15, 2024

You are here: Home / Archives for russians

Cyprus and European Officials Scramble to End Bank Crisis

March 25, 2013 by Leave a Comment

The Cypriot president, Nicos Anastasiades, flew up from Nicosia earlier in the day with a proposal for raising the 5.8 billion euros, or $7.5 billion, that his country is supposed to contribute in order to receive 10 billion euros from the International Monetary Fund and euro zone countries.

After the Cypriot Parliament rejected the original deal, with a one-time tax on all deposits in Cyprus banks, Mr. Anastasiades came back Sunday with revamped terms under which a stiffer tax would be levied, but only on deposits above 100,000 euros, as a way to protect smaller account holders.

Lenders like the I.M.F. and the European Central Bank, also represented at the Brussels meetings, support a deal in which Cypriots impose a substantial tax on wealthier depositors, many of whom are Russians.

 Cyprus faces a deadline of Monday, when in the absence of a bailout deal the E.C.B. has said it will cut off the financing that is keeping Cyprus’s teetering banks from collapsing.

Arriving at the meeting, Wolfgang Schäuble, the German finance minister, was blunt in his assessment of what the Cypriots would need to do to reach a deal after the previous deal, hammered out eight days earlier, fell through. 

“The numbers have not changed. If anything, they have worsened,” said Mr. Schäuble, who was apparently referring to plummeting confidence in the Cypriot banking system as the bailout talks have dragged on and as banks in Cyprus have remained closed for more than a week.“I hope we will achieve a result today,” Mr. Schäuble said. “But that, of course, depends on the people in Cyprus having a somewhat realistic view of the situation.”

Pierre Moscovici, the French finance minister, took a more conciliatory tone, emphasizing the need for a “fair” deal for Cyprus and the need for lenders to make a “shared effort” to help Cyprus.

“The outlines of a solution exist, but the devil is often in the details,” Mr. Moscovici told reporters before the meeting of the finance ministers from the 17 countries in the euro zone. 

Earlier Sunday, Mr. Anastasiades met with the top officials of the so-called troika of organizations that would supervise a bailout: Mario Draghi, the president of the E.C.B.; Christine Lagarde, the managing director of the I.M.F.; and José Manuel Barroso, the president of the European Commission. Jeroen Dijsselbloem, president of the group of finance ministers, also participated. 

Because their meeting ran longer than planned, the session of finance ministers was delayed well past its scheduled starting time of 6 p.m. local time.

Before leaving Nicosia, Mr. Anastasiades briefed Cypriot political leaders on the outlines of his proposal, which was said to call for imposing a one-time tax of 20 percent on amounts above 100,000 euros in deposits at the Bank of Cyprus.

Because the Bank of Cyprus, which has the largest number of savings accounts on the island, suffered huge losses on bets it took on Greek bonds, the government appears inclined to make that bank’s wealthy depositors bear the biggest burden.

The 20 percent tax would also hit those with large accounts at Laiki Bank. Parliament voted Friday to fold its accounts into the Bank of Cyprus, effectively closing down Laiki. A demand by international lenders to make the Bank of Cyprus absorb some of the liabilities associated with Laiki was one sticking point in the talks Sunday night.

A smaller tax, of 4 percent, would be assessed on deposits exceeding 100,000 euros at all other banks, including the 26 foreign banks that operate in Cyprus.

Whether any deal reached in Brussels would be approved by the Cypriot Parliament, whose signoff is needed, remained uncertain.

The late negotiations are the culmination of months of wrangling over how to address the financial troubles of the tiny island nation, which has a population of about 1 million.

James Kanter reported from Brussels and Liz Alderman from Nicosia, Cyprus.

Article source: http://www.nytimes.com/2013/03/25/business/global/cyprus-and-european-officials-scrambles-to-end-bank-crisis.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Facing Bailout Tax, Cypriots Rush to Get Their Money Out of Banks

March 17, 2013 by Leave a Comment

The decision — a first in the three-year-old European financial crisis — raised questions about whether bank runs could be set off elsewhere in the euro zone. Jeroen Dijsselbloem, the president of the group of euro area ministers, declined Saturday to rule out taxes on depositors in countries beyond Cyprus, although he said such a measure was not currently being considered.

A scheduled parliamentary vote on the plan at an emergency meeting Sunday was postponed until Monday. The delay was to give a chance for the newly elected Cypriot president, Nicos Anastasiades, to brief lawmakers, according to the president’s office.

Although banks placed withdrawal limits of €400, or about $520, on A.T.M.’s, most had run out of cash by early evening. People around the country reacted with disbelief and anger.

“This is a clear-cut robbery,” said Andreas Moyseos, a former electrician who is now a retiree in Nicosia, the capital. Iliana Andreadakis, a book critic, added: “This issue doesn’t only affect the people’s deposits, but also the prospect of the Cyprus economy. The E.U. has diminished its credibility.”

In Nicosia, a crowd of about 150 demonstrators gathered in front of the presidential palace late in the afternoon after calls went out on the social media to protest the abrupt decision, which came with almost no warning at the beginning of a three-day religious holiday on the island.

Under an emergency deal reached early Saturday in Brussels, a one-time tax of 9.9 percent is to be levied on Cypriot bank deposits of more than €100,000 effective Tuesday, hitting wealthy depositors — mostly Russians who have put vast sums into Cyprus’s banks in recent years. But even deposits of less than that amount are to be taxed at 6.75 percent, meaning that Cypriot creditors will be confiscating money directly from retirees, workers and regular depositors to pay off the bailout tab.

Mr. Anastasiades said taxing depositors would allow Cyprus to avoid implementing harsher austerity measures, including pension cuts and tax increases, of the type that have wreaked havoc in neighboring Greece. That thinking appealed to some Cypriots, including Stala Georgoudi, 56. “A one-time thing would be better than worse measures,” she said. “Procrastinating and beating around the bush would be worse.”

But Sharon Bowles, a British member of the European Parliament who is the head of the body’s influential Economic and Monetary Affairs Committee, said the accord amounted to a “grabbing of ordinary depositors’ money” in the guise of a tax.

“What the deal reflects is that being an unsecured or even secured depositor in euro-area banks is not as safe as it used to be,” said Jacob F. Kirkegaard, an economist and European specialist at the Peterson Institute for International Economics in Washington. “We are in a new world.”

Cyprus had been a blip on the radar screen of Europe’s long-running debt crisis — until now.

Hobbled by a devastating banking crisis linked to a slump in Greece’s economy, where Cypriot banks made piles of loans that are now virtually worthless, Cyprus on Saturday became the fifth country in the euro union to receive a financial lifeline since Europe’s debt crisis broke out. As the euro zone’s smallest economy, Cyprus had hardly been considered the risk for the euro group that Greece, Ireland, Portugal or Spain were.

But the surprise policy by the International Monetary Fund, the European Central Bank and the European Commission is the first to take money directly from ordinary savers. In the bailout of Greece, holders of Greek bonds were forced to take losses, but depositors’ funds were not touched.

Article source: http://www.nytimes.com/2013/03/18/business/global/facing-bailout-tax-cypriots-rush-to-get-their-money-out-of-banks.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Showdown Looms Over Cyprus Bailout Deal

March 15, 2013 by Leave a Comment

BRUSSELS — Finance ministers from euro area countries arrived here Friday as a showdown loomed with the International Monetary Fund over the size of a rescue deal for Cyprus seen as critical to the stability of the single currency.

The talks could stretch into the weekend, with finance ministers expected to seek to keep a lid on the overall costs of the rescue plan and with Christine Lagarde, the president of the I.M.F., expected to push for a deal that is generous enough to enable Cyprus eventually to pay the money back.

The Cypriot authorities want a plan that ensures that the island remains attractive to investors, who include many Russians with large deposits in the country’s banks.

Arriving at the meeting, Ms. Lagarde was blunt about the need for ministers to agree to a realistic package of measures. “All I know is that we don’t want a Band-Aid,” she said. “We want something that lasts, something that is durable and that will be sustainable.”

The key to a breakthrough is finding a way to bring down the size of any bailout package, estimated at about €17 billion, or $22 billion. That is a small amount compared with the rescue deal for Greece, but almost as much as Cyprus’s gross domestic product, which is about €18 billion.

European governments and the I.M.F. were expected to structure a bailout so that creditors including the European Central Bank reached a deal closer to a figure between €10 billion and €13 billion.

Jeroen Dijsselbloem, the president of the Eurogroup, which gathers finance ministers from countries in the euro zone, refused to speculate about the size of the deal as he arrived on Friday.

“I know what my main goals are,” said Mr. Dijsselbloem, adding that they were to make “sure that there is stability in the euro zone and that there is a new sustainable growth path possible for Cyprus.”

The most contentious issue is whether to force Cypriot depositors to take losses — perhaps in the form of a one-off tax on their holdings — in order to make the country’s debt more manageable. The Cypriot authorities have condemned any such initiatives on the grounds that they would do lasting damage to their financial services sector.

The other elements of a deal could involve Cyprus raising its low corporate tax rate, privatizing state assets and overhauling its banks to ensure that they are not havens for money laundering. Yet another factor is whether Russia will agree to lower the interest rate on a loan worth €2.5 billion it has already made to Cyprus.

Mujtaba Rahman, a senior analyst with the Eurasia Group, a political risk research and consulting firm, said it was likely that countries like Germany and Finland would ultimately reach a deal with the I.M.F.

“The fact is that some governments in the north of Europe need the I.M.F. also to be contributing money to Cyprus in order to convince their parliaments to give approval to a deal,” Mr. Rahman said.

The ferocious debate over how much pressure to put on euro area countries in difficulty stepped up a notch on Friday after it emerged that Mario Monti, the outgoing prime minister of Italy, suggested that the demands placed on him to tighten his country’s finances had been unfair.

In a letter sent Thursday to other E.U. leaders at the start of a two-day summit meeting here on the economy, Mr. Monti wrote that Italy “has been delivering on all the policy objectives” set out by the Union. But, in a thinly veiled reference to Spain, Portugal and Greece, he wrote that other countries “have been given extra time to reach their budgetary objectives.”

Italian voters weary of the E.U.-mandated austerity measures rejected Mr. Monti in an election last month.

Article source: http://www.nytimes.com/2013/03/16/business/global/showdown-looms-over-cyprus-bailout-deal.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,