Cypriots rue US$13 bil. bailout's levy

Lines formed at many ATMs as people scrambled to pull their money out after word that the 10-billion-euro (US$13 billion) rescue package Cyprus agreed with its euro area partners and the International Monetary Fund included a one-off levy on deposits.

In a radical departure from previous aid packages, eurozone ministers forced Cyprus' savers, almost half of whom are believed to be non-resident Russians, to pay up to 10 percent of their deposits to raise almost 6 billion euros.

European officials said people with less than 100,000 euros in their accounts will have to pay a one-time tax of 6.75 percent, those owning more money will lose 9.9 percent. Cypriot bank officials said that depositors can access all their money except the amount set by the levy.

But that hardly assuaged people who continued to withdraw cash from ATMs until the machines ran out, unsure what or how much would be taxed. Officials said that withdrawing funds on Saturday would not reduce anyone's levy.

The country's cooperative banks also shut their doors after depositors scurried in hopes of protecting their savings.

Unlike commercial banks which remain closed on weekends, cooperative banks customarily open for business on Saturday.

The cooperative banks, which represent about a fifth of the island's banking sector, remained open only for a short time. However, people continued to have access to their funds through ATM machines.

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

“This was the least worst option,” he told state broadcaster CyBC. “We battled to prevent the country from completely going bankrupt.”

Government spokesman Christos Stylianides said Cypriot officials had resisted intense pressure to accept a deposit levy of a whopping 40 percent.

The euro zone struck a deal on Saturday to hand Cyprus a bailout worth 10 billion euros (US$13 billion), but demanded depositors in its banks forfeit some money to stave off bankruptcy despite the risks of a wider bank run.

Cyprus becomes the fifth country after Greece, Ireland, Portugal and Spain to turn to the euro zone for financial help in the wake of the region's debt crisis.

“I wish I was not the minister to do this,” Cypriot Finance Minister Michael Sarris said after 10 hours of late-night talks where euro zone finance ministers agreed the package.

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