The overwhelming feeling on the streets of the capital of Cyprus is one of betrayal and confusion as people living on the sun-baked Mediterranean island try to make sense of a deal drawn up in Brussels to save their small nation from economic collapse.
An eleventh-hour, $13-billion rescue planAn eleventh-hour, $13-billion rescue plan may have been struck between the Cypriot government and the “troika” of eurozone lenders — the European Central Bank, the International Monetary Fund and the European Commission — but details were few and Cypriots fear years of financial ruin.
In exchange for the bailout, Cyprus had to agree to raise the equivalent of $7 billion by taxing bank accounts holding more than $131,000 (€100,000) and consolidating the bloated banking system, a move that involves divesting the Cyprus Popular Bank, known as the Laiki.
“What are people thinking here? That they will destroy us?” wondered high school teacher Stelios Metaxes. “They are doing what they want because we are only 800,000 people. What can we do?”
Metaxes and his family were celebrating Greek Independence Day in the pedestrian-only area of downtown. But the celebrations were somewhat sombre.
“It will take years to recover. The government did what they could but when (German Chancellor Angela) Merkel and the troika make decisions, we must obey,” he said.
Margarita, his wife, said quickly: “We await better days ahead from Europe. But now they have disappointed us.”
Weekend-long protests against Germany and the EU ceased on Monday so that Cypriots could celebrate the island’s Greek roots in a country divided by a United Nations buffer zone separating Greek Cyprus from the occupied Turkish north.
Foreign Minister Ioannis Kasoulides vowed to reporters that the country will rebuild again but admitted the eurozone did not treat them with “dignity.”
On Monday night, President Nicos Anastasiades went on television and, according to the Daily Telegraph, announced plans for a “criminal investigation into how Cyprus was led to crisis.”
“This is a painful solution, but the best we could get under the circumstances,” Anastasiades said. “We avoided the bankruptcy of Laika Bank and all the problems that would have brought. … From tomorrow, a new era for Cyprus begins. We have to look ahead.”
The country is nervous about what happens next. The banks, already closed for a week, were to open Tuesday, but the central bank unexpectedly announced late Monday that they’ll not reopen until Thursday now.
Many Cypriots spent Monday making €100 withdrawals from ATMs, the new daily limit. (Some ATMS, for some reason, were dispensing more.)
Lawyer Nick Bratis and his partner, Elena Georgiadou, an accountant, withdrew as much as they could. “We aren’t all wealthy Russians,” said Bratis, alluding to many of the banking system’s offshore clients.
They feel the Cypriot government has kept its citizens in the dark about the terms of the bailout and the suddenness of the financial collapse.
“I’m not happy with the situation. People didn’t expect to have a haircut, or their deposits taken. Everyone will be affected by this,” Georgiadou insisted.
Capital controls, which would limit how much can be withdrawn from banks over the next few months, are said to be part of the deal. The controls are aimed at preventing foreigners from taking all their money out of Cyprus.
“We don’t know what will happen tomorrow,” said Demos Kyprianou, manager of Mardem, a tourist agency. “At least there is a deal, but we are not happy. Lots of Cypriots will suffer.”
Cyprus, geographically closer to Beirut, Turkey and Syria than Greece, has historically had an uneasy peace between the east and west. In July 1974, Turkey invaded Cyprus and thousands died within weeks. Over three decades, 28 Canadian peacekeepers have died there.
The Cypriot economy is minute compared to its eurozone partners, but it is largely built on a questionable banking system operating as a tax haven for many Russians, Europeans and Arabs. Cyprus needed a bailout, in part, after losing billions when Greece had its own government debt crisis a few years ago.
But Cypriots are angry at the suggestion that only Russian mobsters or foreign investors will lose money in the bailout deal. Pensioners, businesses and regular Cypriots who have large bank balances could lose between 20 and 40 per cent of their money in a one-time tax meant to bail out the broke banks and structure them to more closely resemble their European partners.
“Everybody knew the Laiki was in a bad situation. The ex-president, a communist, Demetris Christofias, just kept his mouth shut,” Kyprianou said.
Kyprianou, a veteran of the 1974 war, said Cyprus had no choice but to accept Europe’s terms. “We have to stay in the eurozone. If we don’t we will lose everything.”
Christofias was replaced just last month by the Conservative-leaning Anastasiades, who suddenly found himself thrust in the international spotlight as he tried to save his nation.
Russians are said to hold nearly $31 billion in assets in Cyprus. The Laiki will be split into a so-called “good” bank for those with investments under $131,000 and a “bad” bank aimed at international investors with balances over this threshold. Last week, Russia refused pleas from Cyprus for financial aid.
The deal to save Cyprus was hard-fought and emotionally charged. Anastasiades attended one meeting in Brussels that reportedly made some EU officials physically ill over the contentious terms of the bailout.
EU watchers worry the Cyprus plan could set a precedent for other countries looking for a bailout. Citizens in economically fragile nations may also be asked to allow savings to be confiscated from their accounts in exchange for a loan.
Early last week Anastasiades failed to get approval for a larger levy on all bank account holders, suggested by the EU. That deal would have seen a 6.75-per-cent levy on accounts under $131,000 and a 9.9-per-cent levy on deposits greater than that. The Cypriot parliament overwhelmingly rejected that proposal.
The eventual rescue plan was approved at the 11th hour by the 17-nation eurozone after Anastasiades flew to Brussels on Sunday on an EU commissioned jet.
In a tweet on Monday, Anastasiades thanked Cypriots via Twitter for standing by him: “Thank you for your messages of support. They gave me strength during last night’s struggle to secure the best possible outcome.”
Original Article
Source: thestar.com
Author: Tanya Talaga
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