Eurozone finance ministers have defended a planned levy on savings in Cypriot banks as a key pre-requisite for a bailout package. However, they said that ordinary savers should be protected from the tax.
The ministers spoke in a conference call late on Monday, announcing in a later statement that they believed the tax was "the best way to guarantee a prosperous future for Cyprus."
The levy - intended to raise 5.8 billion euros ($7.5 billion) to help recapitalize the country's banks and service the national debt - is a key condition of a bailout from the eurozone and International Monetary Fund.
However, president of their Eurogroup panel, Jeroen Dijsselbloem said it was within the power of Cypriot authorities to apply the tax more "progressively," provided the same amount of revenue were raised.
"The Eurogroup continues to be of the view that small depositors should be treated differently from large depositors and reaffirms the importance of fully guaranteeing deposits below 100,000 euros," Dijsselbloem said.
Under the terms of the agreement as it stood, accounts of less than 100,000 euros would be subject to a levy of 6.75 percent to help finance the bailout. For accounts with more than 100,000 euros, the figure would jump to 9.9 percent.
Bridging the gap
An amendment could see the tax rate on bigger holdings increased to bridge the revenue gap so depositors with savings of less than 100,000 might escape the tax completely.
The Cypriot government delayed a Monday parliamentary vote on the levy until Tuesday afternoon. It ordered banks to remain closed until Thursday amid fears that Cypriots would try to withdraw as much money as possible from their accounts.
President Nicos Anastasiades has a slim majority in parliament, where the center-right parties that support him hold only 28 seats out of 56. Opposition socialist and communists have said they will vote against the levy.
Hundreds of protesters rallied outside the Cypriot parliament on Monday, with placards slogans such as: "Hang the Banksters," "Hands off People's Savings" and "Merkel Go Home."
rc/lw (AFP, AP, dpa, Reuters)