The Cyprus Bailout

Cyprus hopes for a less taxing bailout package proposal from the EU, but little suggests such news will come.

Cyprus hopes for a less taxing bailout package proposal from the EU, but little suggests such news will come. Photograph: Olivier Holmey

The Cyprus government rejected a joint EU-IMF bailout package to its banks on Tuesday, raising the spectre of a financial meltdown in one of the union’s smaller member states. The parliament threw out the proposed €17bn aid offer after it emerged €5.8bn would have to be levied directly from the island’s bank accounts. Accounts holding €20,000 to €100,000 would have faced a one-time 6.75% tax; and 9.9% for those with over €100,000. Compensation for the levy, an unprecedented move since the beginning of the euro zone crisis, would have included shares in Cypriot banks.

In the wake of Cyprus’s decision, German papers today are mostly focusing on the increased likelihood of Russian involvement in the crisis. Russia has long played a key role on the island, and many bank accounts there are held by Russian nationals. Russia’s previous €2.5bn loan to Cyprus matures in 2016. Now Cypriot Finance Minister Michael Sarris is said to be in talks with his Russian counterpart, Anton Siluanov, to secure a more advantageous bailout.

Die Welt also reports increased anti-German sentiment in Cyprus, with demonstrators blaming Angela Merkel personally for the terms of the bailout package, which many consider to be unfair. The Sueddeutsche Zeitung points out, however, that the island’s two largest banks in fact already owe their survival to the ECB’s continued support.

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