Cyprus proposes no charge on small account holders

Cypriot finance officials revise bailout terms, propose no levy on savings under 20,000 euros

Associated Press
Cyprus proposes no charge on small account holders
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Children run past a banner held by protestors outside of the Cyprus parliament during a crucial meeting in the capital, Nicosia, Monday, March 18, 2013. Cyprus' president is briefing lawmakers ahead of a crucial parliamentary vote on a controversial levy on bank deposits that the cash-strapped country's creditors have demanded in exchange for a euro10 billion (US$13 billion) rescue package. (AP Photo/Petros Karadjias)

NICOSIA, Cyprus (AP) -- Cypriot government officials proposed Tuesday a change to a plan to raid bank deposits that has caused outrage in the country and sent jitters through European financial markets.

Just hours ahead of an expected vote in the country's 56-member Parliament on the seizure of a percentage of deposits, officials sought to limit the impact on small savers.

A new draft bill discussed in Parliament's finance committee proposed to spare all deposits below €20,000 ($25,900) from a charge.

Those between €20,000 and €100,000 would still have a 6.75 percent charge imposed, and those above €100,000 would be hit for 9.9 percent, in line with the original plan put forward at the weekend.

A vote in favor of the bank account confiscation is needed if Cyprus is to get €10 billion in rescue loans from its euro partners and the International Monetary Fund. The seizure of deposits is meant to raise €5.8 billion, which is part of the country's rescue.

If the vote fails to get through Parliament, Cyprus faces potential bankruptcy and a possible from the euro, which could reignite concerns in financial markets over the future of the single currency.

In a sign of the scale of disagreement over the deposit charge, the country's central bank governor recommended that no accounts below €100,000 be touched. That level represents the amount of savings that are supposed to be insured if a bank collapses.

Banks have been shut until Thursday to prevent a bank run.

Finance Minister Michalis Sarris is to fly to Moscow Tuesday afternoon to meet with his Russian counterpart. About a third of all deposits in Cypriot banks are believed to be held by Russians.

Christine Lagarde, managing director of the International Monetary Fund, said in a speech Tuesday in Frankfurt that the IMF was "extremely supportive of the Cypriot authorities' intentions to introduce more progressive rates in the one-off tax."

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