Cyprus Bailout: Threat To Savings
Updated: 1:42am UK, Saturday 23 March 2013
By Ashish Joshi, Sky News Correspondent
Finally late into Friday night - into to an agreement on Plan B, meaning Cyprus has moved one giant step towards securing a Brussels bailout.
It includes a solidarity fund pooling together state assets and the granting of power to the Government to control bank capital.
The latter move is to prevent a run on the banks when their doors finally open on Tuesday.
There will also be a restructuring of the country's banks and a savings tax on Cypriot savers.
The details of the tax have still to be finalised, but the framework is in place.
It could mean savings over 100,000 euros held in Bank of Cyprus accounts being taxed up to 20%, according to one source close to the negotiations.
The same source said if that proposal is rejected there will be a plan to impose a tax of around 10% on all Cypriot bank accounts over 100,000 euros.
The threat of savers being hit hangs over the heads of people like Loizos Michael.
The 60-year-old tailor worked hard for 35 years, building up a good business.
He was looking forward to a wealthy retirement. Not anymore. Times are hard.
Speaking from his small tailor's shop in central Nicosia, Mr Michael said: "With the banks being closed, it is hard because I don't have a credit card and so cash flow is a problem.
"Even filling your car with petrol needs thinking about.
"Cypriots have always been workers by nature and nobody could have imagined that unemployment would be so high.
"This has hit us hard in the pockets."
Cyprus is weathering a storm - the likes of which this Mediterranean island has never faced in her young history.
Mr Michael said he knew things were getting bad, but expected solutions to be found to avoid ordinary people having to suffer.
"I expected something better. But now, it looks like the problem has been brewing for some time," he said.
"There used to be some people talking about the crisis, but now everyone's talking about it.
"I think things are harder now than just after the war. After the war of '74 people could still find work. Now, there is just no work so people have no money. What can we do?"
In the 1990s, Cyprus boasted a dynamic, booming economy, but it grew and unchecked.
An overbloated banking sector exposed to Greek debt has crippled the country's economy.
Now people like Loizos Michael must pay the price. He and the rest of Cyprus will soon find out exactly how much that is going to be.
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