Weekend Economists Escape to Cuba March 15-17, 2013

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31. Cyprus Bank Deposits to Be Taxed in $13 Billion Bailout

http://www.bloomberg.com/news/2013-03-16/euro-area-takes-aim-at-depositors-in-cyprus-bailout.html

Euro-area finance ministers agreed to tax bank deposits in Cyprus in an unprecedented measure to forge a 10 billion-euro ($13 billion) rescue plan.

Cyprus will impose a levy of 6.75 percent on deposits of less than 100,000 euros -- the ceiling for European Union account insurance -- and 9.9 percent above that. The measures will raise 5.8 billion euros in addition to the emergency loans, Dutch Finance Minister Jeroen Dijsselbloem, who leads the group of euro-area ministers, told reporters early today after 10 hours of talks in Brussels.

The European Central Bank will make funds available to the region’s banks as needed to counter potential bank runs. Depositors will receive bank equity as compensation. Finance Minister Michael Sarris said the plan was the “least onerous” of the options Cyprus faced to stay afloat.

“It’s not a pleasant outcome, especially of course for the people involved,” Sarris said in Brussels at 4:55 a.m.