Cyprus Mail
Cyprus

Parties bicker over seizure of deposits in March 2013

EDEK chairman Marinos Sizopoulos made the EC memo 'discovery'.

By George Psyllides

PARTY bickering over the seizure of bank deposits two years ago continued yesterday with the opposition suggesting the government had alternative choices, which it rejected.

The latest twist was the supposed discovery of a European Commission memo dated March 20, 2013, in which it said the Cypriot authorities had rejected a suggestion not to levy a tax on deposits under €100,000.

The first proposal, which was rejected by parliament, provided for a 6.75 per cent levy on deposits under €100,000 (insured) and 9.9 per cent on uninsured, over €100,000.

That decision was rubberstamped on by the Eurogroup on March 16, which apparently realised afterwards that it would not be a good idea.

“Regarding the one off levy on deposits below BELOW €100.000: The Commission made it clear in the Eurogroup BEFORE the vote in the Cypriot parliament (on March 19), that an alternative solution respecting the financing parameters would be acceptable, preferably without a levy on deposits below €100.000. The Cypriot authorities did not accept such an alternative scenario.”

The memo can be found on the Commission’s website and was not something unknown.

EDEK chairman Marinos Sizopoulos, who ‘discovered’ it accused the government of rejecting an alternative to taxing insured deposits.

AKEL said it was obvious that the government had defended its “own proposal for a haircut on all deposits.”

Spokesman Giorgos Loukaides claimed that the government had also hidden a statement made by ECB President Mario Draghi supposedly withdrawing the Eurogroup decision.

In that statement, dated April 4,2013 which can also be found on the ECB website, Draghi was asked what his position was on bailing-in all depositors.

“Were you on board with that and what does that mean for depositors in the euro area going forward?” the reporter asked.

Draghi said: “That was not smart, to say the least, and it was quickly corrected in a Eurogroup teleconference on the next day.”

Following the March 18 teleconference, the Eurogroup said it continued 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. The Cypriot authorities will introduce more progressivity in the one-off levy compared to what was agreed on March 16, provided that it continues yielding the targeted reduction of the financing envelope and, hence, not impact the overall amount of financial assistance up to €10bn.”

Ruling DISY spokesman Prodromos Prodromou said Sizopoulos’ ‘discovery’ only showed that some people were discussing an even higher haircut of uninsured deposits.

The statement did not say there was an alternative solution to the haircut – it clearly says that it could only discuss exempting deposits under €100,000 without changing the financing parameters.

“This simply means they could discuss a higher cut on larger deposits to get the same amount.”

If EDEK’s position or anyone else’s at the time was not to affect insured deposits they could have imposed a higher cut on uninsured deposits.

“Truth is that their position was a general no.”

On March 19, Central Bank governor Panicos Demetriades said the ECB had expressed the wish for uninsured depositors to be protected but to do so it would mean seizing 15.6 per cent of deposits over €100,000.

The first proposal concerned all deposits in all banks. It was rejected by parliament and 10 days later Cyprus had to agree to close its second largest bank, Laiki, and bail-in uninsured depositors in Bank of Cyprus at a rate of 47.5 per cent.

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