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Savers to be compensated by shares, guarantee.

PRESIDENT Nicos Anastasiades said yesterday that savers made to pay a tax on bank deposits as part of a sovereign bailout deal will be compensated by shares in banks guaranteed by future natural gas revenues.

In a televised address to the nation, Anastasiades said he had to accept a tax on bank deposits in return for international aid, or else the island would have faced bankruptcy.

"The solution we concluded upon is not what we wanted, but is the least painful under the circumstances," Anastasiades said.

Cypriot bank depositors will be required to forfeit part of their savings under a deal brokered by eurozone finance ministers on Saturday to offer the island a e1/410 billion bailout. The levy will generate almost e1/46.0 billion in savings.

The news triggered a run on cash-points on Saturday, depleting them within hours while it was unclear whether banks would open for business tomorrow after today's bank holiday.

Parliament has to approve the levy, which calls for a 9.9 per cent cut on deposits exceeding e1/4100,000 and 6.7 per cent on deposits below that figure.

The vote is scheduled for this afternoon.

Anastasiades urged lawmakers to approve the tax, saying it is essential to save the country from bankruptcy.

About 25 lawmakers from communist AKEL, socialists EDEK and the Greens said they will not vote for the tax in the 56-seat parliament.

The vote was initially set for yesterday but was postponed for today.

Meanwhile Russia has made no decision yet on whether to extend the duration or ease the terms of a sovereign loan to Cyprus, a government source told Reuters on today.

European Union officials have said they expect Russia to extend its e1/42.5 billion loan by five years, until 2021, and refinance terms .

The proposed levy on the island's bank deposits, which was a central element of the EU rescue package, should not alter domestic capital flows, a senior Russian official was quoted as saying.

Officials have also said Russian investors are interested in buying a majority stake in Cyprus Popular Bank and increasing their holdings in Bank of Cyprus - the two biggest banks on the island.

Anastasiades chairing a meeting of the cabinet yesterday

Copyright Cyprus Mail 2013

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Publication:Cyprus Mail (Cyprus)
Date:Mar 18, 2013
Words:384
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