Cyprus bailout: ‘Trust in our banks has evaporated. It can only get worse’
Hundreds of protesters vent fury before key parliamentary vote on levy of up to 10% on all bank deposits to pay for rescue plan
Behind the banners reading “Hang the banksters, hands off our savings”, “Who is next Spain or Italy?” or simply “Fuck Europe”, Andreas Constantinou stood outside the Cyprus parliament, with a grim look on his face.
“It’s just unfair,” he said. He had cut short his family lunch to mark the first Monday of Orthodox lent, a bank holiday when Cypriots usually descend on parks to picnic, fly kites and celebrate. Instead, as Cypriot politicians held emergency talks before Tuesday’s parliamentary vote on the controversial levy of up to 10% on all bank deposits, hundreds joined the street protest against the seizure of a chunk of everyone’s savings to satisfy an EU rescue plan.
“This is going to affect everyone, savings or not, because no matter how the politicians tweak it, the damage has been done. Trust in our banks has evaporated, people will take out their money, investors will flee, the economy will be hugely hit and things can only get worse,” said Constantinou, 29.
As a state employee for the Cyprus tourist board, he had already taken two salary cuts in recent years, of €200-300. He earned €1,700 a month, which had also to support his parents and a sister studying in England. His mother was a shop assistant in a furniture store that had laid off over half its staff. His father was a hotel maintenance man.
Both parents often had to wait months for their pay cheques and relied on loans. “I’ll instantly lose the equivalent of one month’s salary from my bank account with this levy. Tourism and business will be massively hit. German and British tourist numbers had been going down, Russians had been rising. But with all the reports that this bank levy is aimed at hitting Russian investors here, it will put off Russian visitors, tourism will suffer.”
A financial manager, 39, who had driven from Limassol to take part in her first ever protest said: “Cypriots aren’t big on street demonstrations, we usually sit back and let things happen. Not anymore. This saving grabs is a human rights abuse.”
The nation hung in baffled suspense. Banks will probably remain closed until at least Thursday as people wondered how they would do business when they go back to work on Tuesday, without being able to make transactions. Some worried how their mortgage repayments would go through. “What we’re living here is surreal,” said one worker in a major retail group. After a run on cash-point machines on Saturday, the ATMs had been replenished but no one could take out more than the usual €500 limit.
Internet banking was frozen. One businessman said when the banks opened he was half thinking of taking as much money as he and his children could take out in briefcases and heading for Beirut. As politicians discussed possible tweaks to the deal, it was not certain whether people with savings under €20,000 would be exempted, whether those with under €100,000 would have their levy cut from 6.75% to 3% or those with over €100,000 have to pay over the planned 9.9%.
But what infuriated people was how wide-reaching the planned levy would be. It was not just those with savings in the bad banks who would be hit, but all savers, even those who had thought it wiser to stick with building societies or foreign banks like Societe Generale’s Cyprus arm.
Alexander Apostolides, economic historian at the European University Cyprus, said: “It’s across the board, every single bank account, current account, even no-interest accounts. There was no distinction, a real bungling. An unemployed person who had just put in their benefits cheque would be hit, someone who had just taken a loan for a house for well over €100,000 could now find €30,000 of it had been taken but they still have to pay it back to their lender. It has been badly thought-out and means a real hit on the economy. Our GDP will be low, which means we’ll come short on repayments. Does this mean Cyprus will need a second bailout? What will they ask of us then?”
Natassa Apostolidou, 34, who lost her job for an advertising agency in the financial crisis, was working freelance contracts for 10-12-hour days and juggling caring for her four-month old baby, because she had bills to pay and student loans to pay off and her husband’s architecture job was far from safe. But because she received her maternity pay two weeks ago as a lump sum, €4,000 , it would now be hit by the government levy. “It’s pretty terrifying to be honest,” she said.
Many feared that if this deal doesn’t work, the biggest banks faced meltdown. But most felt the savings levy would not solve Cyprus’s root problems as it doesn’t address the issues in the public sector and the oversized banking system that had led to the problem.
Cassandra Koupari, 30, a Nicosia lawyer, felt Cyprus, the tiny eastern Mediterranean island of 1.1m people closer to Damascus than Berlin, and which joined the EU in 2004 still plagued by its separation between Greek-speaking south and Turkish north, was being hung out to dry as an “irrelevance on the periphery” of Europe. Whatever the parliament vote on Tuesday, many felt a mortal blow had been dealt to the economy and Cyprus’s reputation as a financial centre, with not just major foreign investors poised to pull out their cash, but smaller ones too.
With Cyprus one of the biggest destinations for British ex-pats after Spain and France, Justin Harris of Chase Belgrave wealth management and financial consultants, said: “Cyprus is a big ex-pat destination, although it’s no Monaco. The kind of British expats that go there take €250,000-300,000 and use that for a fixed income of say €15,000 a year.
“If you take 10% out of it, at say €13,500, that’s a lot. Some may have to leave and very few people will continue to bank in Cyprus. Whether the levy happens or not, people will now take their money out and put it elsewhere. Offshore expat specialist arms of British banks stand to benefit, namely in the Isle of Man.”