THE AUSTRALIAN: ATTEMPTS by the EU and the European Central Bank to resolve the debt crisis have repeatedly become the problem rather than a solution.
Cyprus needs up to about €18 billion ($22.5bn) to recapitalise its banks and for general operations including debt servicing. While small in nominal terms and well within the EU's resources, the amount is large relative to the country's gross domestic product of €18bn. The package proposed by the EU but rejected by Cyprus' parliament incorporates: privatisation of state assets, increases in corporate taxes (from 10 per cent to 12.5 per cent), withholding taxes on capital income (to 28 per cent ) and restructuring of existing bank or sovereign debt.
Most controversially, ordinary depositors will face a "tax" on bank deposits, amounting to a permanent writedown in the nominal value of their deposits. The levy will be 6.75 per cent on deposits of less than €100,000 and 9.9 per cent for those above that.
Labelled "a stupid idea whose time has come" by commentator Karl Whelan, the unprecedented writedown of bank deposits is expected to raise about €5.8bn.
The write-off reduces debt as well as the size of the required bailout package to €10bn to comply with the International Monetary Fund requirement of a sustainable debt level.
As in the case of last year's Greek debt restructuring, the ECB and other official lenders are unwilling to take losses on their exposure, requiring the depositors to take a haircut as Cypriot banks have limited amounts of subordinated or senior unsecured debt that could be written down.
Restructuring the sovereign debt of Cyprus is risky because under governing English law any attempt to restructure these while insulating official creditors from losses would invite litigation. » | Satyajit Das | The Australian | Friday, March 22, 2013
FINANCIAL TIMES: Cyprus targets big depositors in bank plan » | Michael Steen, Kerin Hope, Andreas Hadjipapas, Peter Spiegel and Charles Clover | Thursday, March 22, 2013
THE NEW YORK TIMES: Mood Darkens in Cyprus as Deadline Is Set for Bailout: NICOSIA — Under a European Central Bank threat to shut off crucial financing for banks in Cyprus without a rapid accord, members of Parliament gathered to vote Thursday on yet another revamped formula for securing an international bailout. » | Liz Alderman | Thursday, March 21, 2013
DIE PRESSE: Brüssel stellt Finanzdamm für Zypern auf: Die EU empfiehlt der Insel die Aufhebung des freien Geldverkehrs. Die Europäische Zentralbank will Nikosia nur noch bis Montag finanzieren. » | Michael Laczynski | Donnerstag, 21. März 2013
