Cash machines EMPTIED across Cyprus as 60,000 British savers face losing MILLIONS after £8.7billion EU bailout imposes tax on all of nation’s bank accounts


The Daily Mail

As far as I’m concerned, you would have to be mad to keep your money in a bank anyway. Still, no one can say that the warning signs were not there. Be warned England. This is the shape of things to come.

  • Lines formed at ATMs as people scrambled to pull their money out
  • Word spread that rescue package included a one-off levy on deposits
  • Restrictions stopping people emptying accounts or moving money abroad
  • Up to 3,000 British service personnel are based on the bankrupt island
  • President Nicos Anastasiades agreed to raid with European finance chiefs
  • Said country in ‘state of emergency’ and not acting would be ‘catastrophic’
  • But expats accused the island of ‘plain theft’ as violent protests sparked
  • Britons have around £1.7b of deposits on island and could lose up to £170m


PUBLISHED: 16:23, 16 March 2013 | UPDATED: 02:36, 17 March 2013

Up to 60,000 British savers are to lose thousands of pounds each after European finance chiefs ordered an unprecedented  raid on personal bank accounts.

Expats and UK troops based in Cyprus will have their savings decimated as part of a  painful bid to bail out the bankrupt island.

Britons have about £1.7 billion of deposits in Cyprus and could lose up to £170 million.

One disgruntled customer Panic: A move by Cypriot authorities that could see up to ten per cent of bank deposits seized to bail out the bankrupt sparked panic and violent protests. One disgruntled customer parked a bulldozer in front of a bank in the coastal town of Limassol in protest

The Cypriot government has agreed to seize up to ten per cent of savings and use the money to bail out the island’s crisis-hit banking system.

The move sparked panic and violent protests yesterday as crowds desperately tried to withdraw their money at cash machines.


Restrictions have been imposed to stop  people emptying their accounts or moving their money out of the country following the

deal with other eurozone finance ministers, under which ordinary  citizens’ deposits will be directly raided for the first time.

Furious: Shirley Brooks, 61, who is originally from Manchester, said she stands to lose ¿18,600 of her retirement money Furious: Shirley Brooks, 61, who is originally from Manchester, said she stands to lose ¿18,600 of her retirement money

One furious expat said: ‘This is plain theft. I’d love to hear someone explain to me why it isn’t.’

And one of the 3,000 British service personnel based on the island said: ‘I stand to lose €4,000 [£3,500] We’ve tried to save quite hard while we are here – that’s been thrown back in our faces.’

Cypriot president Nicos Anastasiades, who agreed to the raid following ten-hour talks with European finance chiefs, said it was necessary because  Cyprus was in a ‘state of emergency’ and failure to enact the Brussels plan would be ‘catastrophic’.

Under the deal, all bank deposits over €100,000 will be hit with a levy of 9.9 per cent. Those with smaller savings will pay 6.75 per cent.

The raid will raise €5.8 billion, which will be added to a €10 billion bailout from Brussels.

But financial experts said the move – designed to stop Cyprus crashing out of the euro, potentially destroying the currency – would send shock waves through the eurozone.

If savers in other troubled nations fear their accounts might be next, they could withdraw their money and spark a catastrophic run on the  banks.

Economist Howard Archer from IHS Global Insight said: ‘It is an alarming precedent to hit the man in the street. As much as they say this is a one off, people will say if they can do it once they could do it again.’

Tory MP Douglas Carswell added: ‘We should all be extremely worried about this. It shows that ordinary Europeans are being fleeced by the Continent’s elite in order to rescue foolish banks. Why would you risk putting your money in Greek, Spanish or Portuguese banks after this?’

Panic: People queue withdraw their money from an ATM machine outside in Larnaca, Cyprus, after learning that the terms of a bailout deal includes a one-time levy on bank depositsPanic: People queue to withdraw their money from an ATM machine in Larnaca, Cyprus, after learning that the terms of a bailout deal includes a one-time levy on bank deposits

The European Central Bank said Britons have £1.7 billion deposited  on the island.

British expats were stunned by the news, with many left high and dry by the restrictions on accounts.

Cash machines had been working, but many ran out of notes because of the panic withdrawals. Tomorrow is a public holiday in Cyprus, too, so savers will have to wait until Tuesday until they can access their money.

Worry: Steve Carr, a financial advisor originally from York, has been living in the coastal city of Limassol for 24 years. He said the solution could make the situation worse and personally stands to lose ¿2,000 Worry: Steve Carr, a financial advisor originally from York, has been living in the coastal city of Limassol for 24 years. He said the solution could make the situation worse and personally stands to lose ¿2,000

Andy Georgiou, 32, who grew up in Liverpool, said: ‘We are struggling. We can’t access money and we need it to buy petrol and food. It’s appalling. All without any warning.’

Sean Chamberlain, a 39-year-old writer from Devon who now lives  in Cyprus, said: ‘There are a lot of  people who are very angry. Everyone was furious, feeling absolutely betrayed by yet another apparently incompetent government.

‘And now they’ve done it once, what’s to stop them deciding to do it again next week? If there’s a run on the bank, that’s a terrifying thing.’

Shirley Brooks, 61, originally from Manchester, stands to lose €18,600. She said: ‘I am extremely angry. This is our retirement money, and there was no warning that this was coming. I don’t think we should have to pay anything as we did not cause the problems in the economy.’

Her sentiments were echoed by former Army officer Graham Smith, who moved to Cyprus from Dundee five years ago. ‘I don’t believe we Brits should have any money taken,’ he said. ‘We have not contributed to the bankruptcy. If anything, all we’ve done is contribute to the economy.’

He stands to lose about €2,000, as does financial adviser Steve Carr, who is originally from York but has  been living in the coastal city of Limassol for the past 24 years.

He said the supposed solution to the island’s woes could make matters worse: ‘When the banks reopen,  people will start moving their money out of Cyprus because they don’t want this happening again. This could create a run on banks, which would be a very bad thing for Cyprus.’

Rescue package: The island national has been bailed out by European partners and the International Monetary Fund in a bid to prevent it entering a bankruptcy which could rekindle the region's debt crisisRescue package: The island national has been bailed out by European partners and the International Monetary Fund in a bid to prevent it entering a bankruptcy which could rekindle the region’s debt crisis

Cyprus' Finance Minister Michalis Sarris defended the decision to accept the levy, saying it was either that or a complete economic meltdownCyprus’ Finance Minister Michalis Sarris defended the decision to accept the levy, saying it was either that or a complete economic meltdown

Angry crowds gathered to demonstrate outside the presidential palace in the capital of Nicosia yesterday.

President Anastasiades held emergency talks with his cabinet and other party leaders last night and is expected to make a televised address today explaining the situation.

Because of tomorrow’s public holiday, he has two days to pass a law  to enact the Brussels deal in time to seize the cash from bank accounts before Tuesday morning.

In a statement he said: ‘We either choose the catastrophic scenario  of disorderly bankruptcy or the  scenario of a painful but controlled management of the crisis.’

It is understood savers will be offered shares in Cyprus banks as compensation for the raid on their savings, but it is unlikely to appease those who have lost hard cash.

A spokesman for the Cypriot government said yesterday the agreement with Brussels was ‘serious but not tragic’ and said that the EU had wanted a much higher levy, but the government had fought hard against it.

He said: ‘The dilemma is whether we would have a functioning economy or total collapse on Tuesday .  .  . whether to give in at the 6.75 per cent mark or lose 100 per cent.’

The UK’s Ministry of Defence declined to comment, but Government sources suggested Ministers were considering whether to help the British troops affected.

Additional reporting: Abul Taher and Martin Beckford



Cyprus’ eurozone partners and the IMF agreed early Saturday to bail out Cyprus to the tune of 10billion euro ($13billion) – largely to prop up its flailing banking industry. But the deal, as usual, comes with strings attached. The one causing the most consternation is a levy on bank deposits held in Cypriot accounts. Here’s a look at how that will work – and the problems it may pose. 

Currently, all 17 European Union countries that use the euro offer deposit insurance to protect customers if their bank fails. But the measure in the Cyprus deal is a tax – not losses incurred because of a bank failure. In fact, it’s meant to hold off a bank collapse. Countries have the right to raise or lower taxes whenever they want. Just ask the residents of Greece, Portugal and Ireland – all bailout recipients – who saw their tax bills skyrocket as those countries tried to reduce their debts. But Cyprus is charting new ground here, and there could be legal – and political – challenges. 

Banks have already acted to seal off the amount of the levy – a 6.75 per cent tax on deposits under 100,000 euro and 9.9 per cent on those above – so depositors can’t access it. Bank customers still can draw on the rest of their funds via ATM machines this weekend, and nervous depositors did that on Saturday to drain their accounts. But the few banks that opened on Saturdays did so only briefly, and no international transfers will be able to go through until Tuesday, since Monday is a holiday. Cyprus’ Parliament is expected to meet Sunday to pass the required legislation. The deal also needs the approval of several eurozone parliaments; it’s unclear how fast they can act and what will happen to bank deposits in the meantime. 

So far in the euro crisis, depositors have been protected. But in the 1990s, Italy levied a tax on every bank account to stave off the collapse of its lire currency. The rate, however, was minuscule – 0.06 per cent – compared to what Cyprus is enacting. Iceland – another island with an outsized financial sector, although worse weather – also relied on depositors to prop up its banks. 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. Those two governments stepped in to help their citizens to the tune of $5billion. The U.K. and the Netherlands sued Iceland unsuccessfully in a European court to get their money back, but Iceland has nevertheless started to repay some of that money. 

European officials are promising that Cyprus is a unique case, and they are right in one aspect: the country’s banks are overwhelmingly funded by deposits, so it wouldn’t have been very fruitful to go after bondholders. 

All depositors – except those in Greek branches, which will be sold to Greek banks. EU and IMF creditors clearly wanted to protect struggling Greece, but perhaps also saw that Greece is the most likely place in the eurozone for a bank run. Protecting depositors there minimizes that possibility. Of the about 68billion euro on deposit in Cypriot banks, foreigners hold about 40 per cent – and most of those are Russians. Cyprus could have only gone after non-EU depositors, but it may have been hard to distinguish between Cypriot and Russian savers, Jacob Kirkegaard said, since many Russians have dual citizenship and many Russian businesses are registered on the island. Kirkegaard, who is a senior fellow at the Peterson Institute for International Economics in Washington, 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. 

Cyprus built its economy in recent years by becoming a financial centre, much the way Ireland and Iceland had done. Its banks offered Internet accounts to foreigners, were renowned for their service and provided substantial privacy to clients in a country with very low tax rates. It worked so well that Cyprus’ banking industry ballooned to nearly eight times the country’s gross domestic product at the height of the boom. In December, it was still more than seven times Cyprus’ 17.5billion euro GDP. Russians – looking for warmer climes, friendly tax rates and shared culture in the form of Orthodox Christianity – are thought to hold the majority of those, with about 20billion euro in the island’s banks. 

But Cyprus’ banks held a lot of Greek debt and suffered significant losses when they took a write-down of those bonds as part of the Greek bailout. Much of Cyprus’ bailout money will be used to recapitalise Cypriot banks to prevent them from collapsing. Like other eurozone countries, Cyprus has also seen its deficit and debt explode as growth has ground to a halt. And with the banking system so large, the government wouldn’t have been able to bail it out even in a healthy economy. 

Cyprus may be on holiday Monday, but the rest of the world will go back to work. 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. Bond markets may react a little since bondholders were also tapped. Bank stocks will probably fall and they’ll see their borrowing costs rise since this deal is a signal that other eurozone countries may call on bondholders, if their banks run into trouble. 

But Heather Conley, director of Europe program for the Center for Strategic and International Studies, says it’s hard to know the far-reaching implications of this one-off deal. The ‘exceptions’ created to solve Europe’s debt crisis are adding up, she said. And some investors may look at this late-night, three-day-weekend deal and see what she saw: a dress rehearsal for a country dropping out of the euro.

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