Russia warns EU about Greek Cyprus bank fall

BRUSSELS - Reuters

People queue to withdraw money at a Bank of Cyprus branch in Athens. Banks in Greek Cyprus remain closed amid fears of a run on lenders. REUTERS photo

Russia’s envoy to the European Union likened a proposed tax on Greek Cypriot bank deposits yesterday to forceful expropriation and said it could lead to the collapse of the Greek Cypriot banking system.

The bank deposit tax, part of a bailout for Greek Cyprus agreed by the euro zone on March 16, “seems similar to forceful expropriation”, Vladimir Chizhov told reporters in Brussels, in a video conference from Moscow. “The principle is wrong.”

“This decision is dangerous because of possible social repercussions in Greek Cyprus and it is dangerous in terms of triggering possible domino effects in euro zone countries,” he said, speaking through an interpreter.

“And there is another threat. When the banks open, people will rush to withdraw their deposits - that’s another threat - and then the whole banking system can collapse,” he said.

Russians account for much of the billions of euros held in Greek Cypriot banks by foreign depositors. It banks are heavily exposed to the island.

Although it is not formally on the agenda, Chizhov said he expected the Greek Cyprus issue to be raised in talks between the Russian government and the European Commission in Moscow on tomorrow and March 22.

Government spokesman Christos Stylianides said Anastasiades may also speak toVladimir Putin, the Russian president, who described the tax on March 18 as “unfair, unprofessional and dangerous.”
Meanwhile, Greek Cyprus’ Finance Minister Michael Sarris offered his resignation before the voting session yesterday and the ruling party was said to considering abstaining from the vote, as the media reported.

Greek Cypriot Parliament began debating a deeply divisive levy on bank deposits to secure an international bailout March.19 evening.

The outcome was uncertain, after President Nicos Anastasiades warned the assembly would likely reject the bill as “unjust”, threatening to tip the Mediterranean island deeper toward financial chaos.

Greek Cyprus agreed a 10-billion-euro EU bailout whose terms stipulate that a controversial levy of at least 6.75 percent will be slapped on all bank deposits across the island.

Anastasiades refused to accept a levy of more than 10 percent on deposits above 100,000 euros, which meant taxing smaller accounts too. That hurts ordinary savers with deposits that they thought came with a state guarantee.

A revised draft bill seen by Reuters would exempt savings under 20,000 euros from the planned 6.75 percent levy on deposits of less than 100,000 euros. The government has not explained how it would fill the funding gap this would create.