Putin Blasts Cyprus Levy on Bank Deposits as ‘Unfair’

Putin Blasts Cyprus Levy on Bank Deposits as ‘Unfair’

MOSCOW, March 18 (RIA Novosti) – Russian President Vladimir Putin believes the Cypriot government’s plans to impose a one-off levy on all bank deposits as part of a bailout deal to get much-needed loans from international creditors would be “unfair, unprofessional and dangerous,” Kremlin spokesman Dmitry Peskov said Monday.

Putin held a meeting Monday with administration staff and economic aides to discuss economic developments in the eurozone, Peskov said.

“In assessing a possible decision to impose an additional tax on bank deposits in Cyprus, Putin said this decision, if made, would be unfair, unprofessional and dangerous,” Peskov quoted Putin as saying.

The European Union and the IMF agreed on Saturday to bail out Cyprus’ debt-laden economy and grant the island nation a loan worth 10 billion euros ($13 billion) in return for the government’s obligation to tax all deposits kept at Cypriot banks.

Under the terms of the bailout deal, Cyprus will have to impose a levy of 6.75 percent on deposits of less than 100,000 euros and 9.9 percent on deposits with greater amounts. Cypriots reacted with shock and rushed to cash machines to withdraw their savings, but many machines refused to pay out.

Cypriot President Nicos Anastasiades said he had to choose between the “catastrophic scenario of disorderly bankruptcy and the scenario of a painful but controlled management of the crisis.”

The bailout plan has yet to be approved by Cyprus’ parliament, with the vote on the bank deposit levy scheduled for Tuesday.

Russian banks are heavily exposed to Cyprus risk as they had around $12 billion on deposit with Cypriot banks at the end of last year, with Russian corporate deposits accounting for another $19 billion, according to estimates by Moody’s international rating agency.

Russian Prime Minister Dmitry Medvedev echoed Putin’s comments on the Cyprus bailout deal, comparing the proposed tax on bank deposits to “the confiscation of other people’s money.”

“Quite strange and controversial decisions [are] being made by some EU member states. I mean Cyprus. Frankly speaking, this looks like the confiscation of other people’s money,” Medvedev said, speaking at a meeting of the supervisory board of national development bank Vnesheconombank.

He added that Russia may have to reconsider its relationship with Cyprus if the island nation introduces the controversial tax on bank deposits, but did not clarify what specifically he had in mind.