PARIS (AP) — Lawmakers in Cyprus are still scrambling for a way to raise €5.8 billion ($7.5 billion) to help pay for an international bailout of the country's banks and government.
A plan to seize up to 10 percent of people's savings has been met with fury and it has raised concern, if not panic, in the rest of Europe about the security of bank deposits in times of financial turmoil.
On Tuesday, Cypriot lawmakers are scheduled to vote a revised plan that would not be so burdensome for people with less than €100,000 in the bank.
When the crisis hit there in 2008, Iceland protected its domestic deposits but reneged on deposit insurance for overseas, Internet-based accounts held by British and Dutch.
Kirkegaard said Cypriots may paradoxically welcome this measure since the government just managed to widen its tax base to include a lot of Russians; the taxes levied in Greece, Portugal and Ireland were for residents alone to shoulder.
Russians — looking for warmer climes, lower tax rates and shared culture in the form of Orthodox Christianity — are thought to hold the majority of those accounts, with about €20 billion in the island's banks.
Russian businessmen have preferred to place their savings in offshore jurisdictions, partly to escape political uncertainty and corruption in Russia.
Cyprus offers a 10 percent corporate tax rate and relatively stable political situation.
Russian officials estimated that about $49 billion, which is equivalent to 2.5 percent of Russia's gross domestic product, was wired to foreign accounts illegally last year.
Kirkegaard says that the decision to tap depositors indicates that the European Central Bank is confident that the risk of a bank run elsewhere in the eurozone is low — and by excluding Greek branches of Cypriot banks, they have reduced the possibility even further.
A plan to seize up to 10 percent of people's savings has been met with fury and it has raised concern, if not panic, in the rest of Europe about the security of bank deposits in times of financial turmoil.
On Tuesday, Cypriot lawmakers are scheduled to vote a revised plan that would not be so burdensome for people with less than €100,000 in the bank.
When the crisis hit there in 2008, Iceland protected its domestic deposits but reneged on deposit insurance for overseas, Internet-based accounts held by British and Dutch.
Kirkegaard said Cypriots may paradoxically welcome this measure since the government just managed to widen its tax base to include a lot of Russians; the taxes levied in Greece, Portugal and Ireland were for residents alone to shoulder.
Russians — looking for warmer climes, lower tax rates and shared culture in the form of Orthodox Christianity — are thought to hold the majority of those accounts, with about €20 billion in the island's banks.
Russian businessmen have preferred to place their savings in offshore jurisdictions, partly to escape political uncertainty and corruption in Russia.
Cyprus offers a 10 percent corporate tax rate and relatively stable political situation.
Russian officials estimated that about $49 billion, which is equivalent to 2.5 percent of Russia's gross domestic product, was wired to foreign accounts illegally last year.
Kirkegaard says that the decision to tap depositors indicates that the European Central Bank is confident that the risk of a bank run elsewhere in the eurozone is low — and by excluding Greek branches of Cypriot banks, they have reduced the possibility even further.
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