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19 Mar 2013
Cypriot parliament expected to discard EU bailout scheme
FXstreet.com (Barcelona) - The Cypriot parliament is due to vote on the controversial EU bailout in the European afternoon, at 16 GMT. The country’s president Nicos Anastasiades has already signalized that the plan would not be backed and that the government was working on “Plan B”.
According to reports, the Cypriot proposition anticipates that deposits of up to 20,000 euros would not be taxed. A levy of 6.75% would be imposed on deposits of between 20,000 and 100,000 euros, a 9.9% levy on deposits of above 100,000 and a levy of 12.5% would be applied to deposits avove 500,000 euros.
Nevertheless, The Central Bank of Cyprus’s governor Panicos Demetriades suggested in the European morning that exempting deposits of up to 20,000 euros from tax would result in falling short 5.8 billion euros of the target established by international lenders.
According to Marc Chandler, Global Head of Currency Strategy at BBH: “The Cypriot government and parliament are searching for alternatives to raise EUR5.8 bln. The problem is that there are not many other places to turn in Cyprus and a narrower base for the wealth tax will require much higher taxes on the more limited number of larger deposits.”
After holding a teleconference yesterday the Eurogroup said that Nicosia would be allowed to soften the impact of the savings tax on small depositors. IMF head Christine Lagarde expressed her support today: “We are also obviously extremely supportive of the Cypriot authorities' intentions to introduce more progressive rates in the one-off levy or deposit-share swap within the agreed financial envelope of €5.8bn.” EU sources said that Lagarde even proposed a harsh 30-40% levy on largest depositors.
Cypriot banks as well as the stock exchange are to remain closed until Thursday.
According to reports, the Cypriot proposition anticipates that deposits of up to 20,000 euros would not be taxed. A levy of 6.75% would be imposed on deposits of between 20,000 and 100,000 euros, a 9.9% levy on deposits of above 100,000 and a levy of 12.5% would be applied to deposits avove 500,000 euros.
Nevertheless, The Central Bank of Cyprus’s governor Panicos Demetriades suggested in the European morning that exempting deposits of up to 20,000 euros from tax would result in falling short 5.8 billion euros of the target established by international lenders.
According to Marc Chandler, Global Head of Currency Strategy at BBH: “The Cypriot government and parliament are searching for alternatives to raise EUR5.8 bln. The problem is that there are not many other places to turn in Cyprus and a narrower base for the wealth tax will require much higher taxes on the more limited number of larger deposits.”
After holding a teleconference yesterday the Eurogroup said that Nicosia would be allowed to soften the impact of the savings tax on small depositors. IMF head Christine Lagarde expressed her support today: “We are also obviously extremely supportive of the Cypriot authorities' intentions to introduce more progressive rates in the one-off levy or deposit-share swap within the agreed financial envelope of €5.8bn.” EU sources said that Lagarde even proposed a harsh 30-40% levy on largest depositors.
Cypriot banks as well as the stock exchange are to remain closed until Thursday.