Expats in Cyprus concerned about banking crisis

by Ray Clancy on March 20, 2013

Expats in Cyprus concerned about banking crisis

Expats in Cyprus concerned about banking crisis

Almost 60,000 expats living in Cyprus are still worried about their savings even although the government has been defeated in its attempt to impose a one off tax on savings bank accounts. The proposal to impose a 6.75% tax on all savings between €20,000 and €100,000 and 9.9% on all savings over €100,000 was rejected by MPs last night.

However, expats are facing the prospect that the Mediterranean island’s banks system is set to collapse and they feel that they have been failed by the European Union and the International Monetary Fund which came up with the tax as a condition for further bailout funds. It is estimated that over 59,000 expats have funds amounting to £170 million in Cypriot bank accounts. They cannot currently access their money as banks have remained shut since the crisis emerged at the weekend.

Many are also worried about their pensions and retirement funds as a large number of expats have put their life savings into Cypriot banks and are now worried that they could lose tens of thousands of euros. The fact that the country’s recently elected President Nicos Anastasiades was willing to back the plan to tax savings to bail out the banks is regarded as worrying for all expats living in Europe and there are concerns that such an idea could be proposed in other hard hit EU countries such as Spain, Italy and Portugal.

In Cyprus it was well known that the banks were struggling but expats say that they believed assurances from Anastasiades that their money was safe. However, a few may have removed their money to what they perceived to be a safer jurisdiction, the vast majority did not. Therefore, they were taken by surprise when the tax plan was put forward a few days ago. Anastasiades said that as the EU and International Monetary Fund is demanding Cyprus raise €5.8 billion to secure its bailout, there seemed little choice but to seek the money from bank deposits in the form of a one off tax.

People queued at cash machines to try to get their money out but they quickly ran out of notes and banks were closed for a holiday on Monday. The banks have remained closed amid fears that the majority of customers would rush in to withdraw all their money. Now it is likely that banks will remain closed this week and next Monday is another bank holiday. But this is leaving people unable to pay their bills and some even have no money for essentials like food.

Quote from ExpatForum.com : “The one time tax will be 9,9 percent for amounts over 100000 euro and 6,75 if you have under that amount in the bank. This will give Cyprus state 5,8 billion. It will also be tax on the interest you get from the bank.”

Cyprus has run into serious financial difficulty because its banks were heavily exposed to Greek debt although the European Central Bank says that, for the moment at least, it is continuing to provide liquidity to Cyprus’ banks in accordance with its usual rules and procedures.

Now the island’s government is hoping that Russia might help and last night Finance Minister Michalis Sarris flew to Moscow. Russia has a major interest in preventing the island’s banking system collapsing as it is a major player in the Cyprus banking system with at least a third of all bank deposits being made by Russians. Russia has turned the island into its preferred offshore banking centre over the past 20 years and Cyprus is a major foreign investor in Russia. However, many Cypriots are unhappy about the financial relationship between the two countries.

{ 6 comments… read them below or add one }

Jeff Rose March 21, 2013 at 9:36 am

What I'd like to know is, what happens if Cyprus or the Cyprus banks do go bankrupt, is all money up to €100,000.00 per deposit safe and guaranteed as it is supposed to be.#?

Can anyone answer this question please?

Reply

Bombjack March 22, 2013 at 9:56 am

No, it isn't safe.

The organisation responsible for paying the £100k is the government of Cyprus, not the EU. Therefore, the guarantee is worthless, as the government of Cyprus would never be able to find the 30 billion it would need to compensate account holders.

The same goes for Spain, Portugal, Ireland, Greece, etc. Unless you can print your own currency (like the UK), you cannot guarantee deposits.

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maleva March 22, 2013 at 11:48 pm

why the brits live in Cyprus? they got what they deserve by being the poerennial colonialists that they are

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Lesley Bennett March 25, 2013 at 4:31 pm

If i had 110,000 euros in a Cypriot bank would i be penalised on the 10,000 euros or the whole amount? It is not very clear in the proposals.

Reply

Guest March 26, 2013 at 10:54 am

The current crisis hits everyone in Cyprus whatever nationality, and sets a precedent for the rest of Europe. This will affect the future of banking and take away the trust, if the government of the time decide to change the rules to bail out their own inadequacies, no one is safe in future. I'm sure that this is illegal under EU rules anyway, so it will take someone who is able to sue for the return of their money to prove it and get everyones money back!

Reply

yann April 3, 2013 at 8:26 am

The FED should be scrapped! they are ruining the whole world!

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