George Osborne has said that troops and civil servants serving in Cyprus whose savings are threatened by the island's £8.7bn bailout will be compensated.
The Chancellor described the Cypriot bail-out as an "extraordinary"
situation, but he pledged that British armed forces personnel and Government
staff serving on the island will be protected from the bank levy.
"It’s a difficult situation for people who live in Cyprus," Mr
Osborne told the BBC's Andrew Marr Show. "For people serving in our
military and our government out in Cyprus, we are going to compensate anyone
affected by this bank tax - people who are doing their duty for our country
in Cyprus will be protected from this Cypriot bank tax."
He added that Britain was "not part of the bail-out" because David
Cameron "got us out of these euro bail-outs" when he became prime
minister and he added that Cyprus is an example of "what happens if you
don't show the world you can pay your way".
"That’s why in Britain we’ve got to retain the confidence of world
markets," said the Chancellor.
William Hague, the foreign secretary, later echoed the Chancellor's pledge.
Speaking on Sky, he said that the Government was currently working on
details of the compensation.
Thousands of British savers, including armed forces personnel, are to be hit by a eurozone tax on Cypriot banks after the island’s £8.7bn bail-out.
Approximately €2bn (£1.7bn) of British deposits held in Cyprus will be subject to a levy of up to 10pc.
British-born Cypriots and their families, some of the UK’s 3,500 service personnel on the island and holiday home owners with savings locally are likely to be affected. The tax will raise €5.8bn to refinance the country’s ailing banks, in addition to the eurozone funds. The Government is considering reimbursing some of those affected.
In a departure from previous eurozone bail-outs – the Mediterranean country is the fifth to have turned to the eurozone for financial aid – savers are being asked to make sacrifices in a move which critics say sets dangerous precedents.
As well as the levy on savers, the Cypriot government has also agreed to
increase its corporation tax rate by 2.5 percentage points to 12.5pc to
boost revenues.
Further measures include bank restructuring, a “bail-in” of junior bondholders (where some of their debt will be turned into less valuable equity) and the increase of the taxes on capital income.
The deal means that savers will be forced to sacrifice up to 10pc of their deposits.
After a bank holiday in the country on Monday, the levy on bank deposits will come into force on Tuesday. The emergency levy will be 9.9pc for deposits over €100,000, and 6.75pc for lower sums. Depositors will receive bank equity as compensation.
Government sources on Saturday night stressed that funds in the London branches of Bank of Cyprus UK and Laiki Bank would not be affected. The value of those funds is not known, however. Treasury officials said that “deposits in UK subsidiaries and branches [of Cypriot banks] aren’t affected” by the measure.
Thousands of British savers, including armed forces personnel, are to be hit by a eurozone tax on Cypriot banks after the island’s £8.7bn bail-out.
Approximately €2bn (£1.7bn) of British deposits held in Cyprus will be subject to a levy of up to 10pc.
British-born Cypriots and their families, some of the UK’s 3,500 service personnel on the island and holiday home owners with savings locally are likely to be affected. The tax will raise €5.8bn to refinance the country’s ailing banks, in addition to the eurozone funds. The Government is considering reimbursing some of those affected.
In a departure from previous eurozone bail-outs – the Mediterranean country is the fifth to have turned to the eurozone for financial aid – savers are being asked to make sacrifices in a move which critics say sets dangerous precedents.
Further measures include bank restructuring, a “bail-in” of junior bondholders (where some of their debt will be turned into less valuable equity) and the increase of the taxes on capital income.
The deal means that savers will be forced to sacrifice up to 10pc of their deposits.
After a bank holiday in the country on Monday, the levy on bank deposits will come into force on Tuesday. The emergency levy will be 9.9pc for deposits over €100,000, and 6.75pc for lower sums. Depositors will receive bank equity as compensation.
Government sources on Saturday night stressed that funds in the London branches of Bank of Cyprus UK and Laiki Bank would not be affected. The value of those funds is not known, however. Treasury officials said that “deposits in UK subsidiaries and branches [of Cypriot banks] aren’t affected” by the measure.
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