It has emerged today that the Greek Cypriot government is attempting to change the terms of the ‘haircut’ imposed by the EU in return for a bailout of 10 billion euros.
The current terms are that every bank depositor with 100,000 euros or less would be taxed at 6.75% and those over that amount would face a 9.9% tax.
However EU officials are now saying that there is an amendment being proposed, where savers with 100,000 to 500,000 euros would face a 10% tax while those with savings over 500,000 euros would be taxed at 15%.
European central bank member, Joerg Asmussen has said that it is up to the Cypriot government to decide on the structure of the levy. However the total amount raised must amount to 5.8 billion euros.
This levy still needs to be approved by the House of Representatives and approval is far from certain. There is huge public anger in the South and the parliament meeting has been postponed a number of times.
There is also the danger that even after the levy is imposed, whenever the banks open, there will be a run on the banks, as depositors flock to withdraw their deposits.