In return, Cyprus is being asked to trim its deficit, shrink its banking sector and increase taxes. OK, so far, fair enough, but the sting is in the tail, because there will also be a one-off levy of savings deposits.
- Depositors with under 100,000 euros deposited must pay 6.75%
- Those with more than 100,000 in their accounts must pay 9.9%
- Depositors will be compensated with the equivalent amount in shares in their banks
Which is a nifty for the banks who will see their capital base increased by 10% of their deposits, but not so hot for savers.
How and why did this come about? Well according to Reuters, someone in Germany said they were pretty convinced that most of the money in Cyprus belonged to Russian money launderers, so rather than bothering to find out the facts, the EU just decided to effectively confiscate cash from all depositors next Tuesday.