The Mediterranean island of Cyprus has been in the headlines over the weekend after its government announced that it had struck a deal with the European Central Bank and the International Monetary Fund to bail out its troubled banking sector. The terms of the bail out include a levy on savers deposits of up to 10%. News of the deal has sparked public anger and led to a wave of cash withdrawals from cash-points around the country as savers tried to beat the levy. The banks will remain closed until Wednesday as the country’s parliament will debate and vote on the measures tomorrow, Tuesday.

The highly controversial levy will take 6.75% of savers deposits on amounts below €100,000 and 10% for amounts above that figure. Private individuals, businesses, service personnel and ex-pats will all be hit by the levy, although it seems likely that the final terms of the levy will change before the debate tomorrow.

Joerg Asmussen, a member of the European Central Bank’s governing council, said there would be no objection to Cyprus altering the bailout terms, saying “It’s the Cyprus government’s adjustment programme. If Cyprus’ president wants to change something regarding the levy on bank deposits, that’s in his hands. He must just make sure that the financing is intact. The important thing is that the financial contribution of 5.8bn euros remains.” In other words the Cyprus government could change the percentages and cut-off points for the levy, but that it still must raise the €5.8bn contribution required from savers.
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