The weekend announcement that Cyprus would impose a tax on bank accounts as part of a 10 billion euro ($13 billion) bailout by the European Union broke with previous practice that depositors’ savings were sacrosanct. The euro and stock markets fell on concern the euro zone crisis was returning.
Before the vote, which is too close to call, the government was working to soften the blow to smaller savers by tilting more of the tax towards those with deposits greater than 100,000 euros ($130,700. Many of these depositors Russians and the planned levy has already elicited an angry reaction from President Vladimir Putin.
The government says Cyprus has no choice but to accept the bailout with the tax on deposits, or go bankrupt.
A Cypriot source told Reuters the introduction of a tax-free threshold for smaller bank deposits – maybe up to 20,000 euros – was under discussion but not yet agreed.
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