Euro ministers agree to ease bank levy conditions for Cyprus
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Faced with mounting public outrage in Cyprus and hostile reaction from global financial markets, the euro zone finance ministers have decided to ease the conditions of a bank levy for small savers, which was agreed last Saturday as part of a 10 billion-euro (13 billion dollars) bailout for the debt-stricken nation.
The ministers of the 17-nation euro group agreed at an emergency conference call on Monday night that small depositors on the Mediterranean island should be treated
differently under the bank levy plan approved by all member-nations.
They agreed that the Cypriot government would introduce progressivity in the one-off levy, meaning that it can shift the tax burden from savers below 1,00,000 euro level to large deposit holders.
The finance ministers did not specify how this could be achieved, but one proposal is to increase the levy for deposits of about 1,00,000 euros to more than 12 per cent and
to introduce a tax-free threshold up to 20,000 euros.
However, the government will have to fulfil its commitment to raise 5.8 billion euros to secure the bailout.
As per the plan agreed last week depositors up to 1,00,000 euros would have to pay a one time levy of 6.75 per cent and those above that level will be charged 9.9 per cent.
Their decision unleashed massive protests in Cyprus and and sent shares tumbling in Asia and in Europe.
A meeting of the Cypriot parliament in Nicosia to vote on the bailout deal was postponed twice as the newly-elected government of president Nicos Anastasiades scrambled to get sufficient majority to pass the legislation.
A vote is now scheduled for Tuesday evening and the President, who took over only a week ago, is under intense pressure to announce changes to the tax plan before Parliament convenes.
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