I never saw Clive Turner’s letter as it appeared (Sunday Mail 17 February.), as I was in Virginia to attend a meeting of the Professional Division of The Monroe Institute, famous for the Out-of-Body experience.  The Professional Division largely consists of people with advanced degrees.  Our 60-odd attendees from 9 countries included 11 Ph.Ds (many in Physics), 7 MDs and numerous MAs and MScs.  These are serious researchers, not gullible fools.

With respect, I suggest that while Clive’s proclamation that “There is but one life and we should make the most of it” reflects strongly his personal prejudice, it completely fails to address the issues raised in my letter headed “Conventional scientists never stop to ask themselves what they really know” (Cyprus Mail 9 February).  For one, he far too easily dismisses OBEs and NDEs as due to “rogue electrical manifestations in the brain”, an opinion no longer as widely held by neuroscientists as it once was.

Clive asserts that “countless millions” share his belief.  Aside from the fact that numbers are irrelevant (millions once believed the earth to be flat, and even today billions naively assume that the sun independently rises and sets every day), he fails to note that other “countless millions” do accept reincarnation.

He ignores the work of Dr. Ian Stevenson, whose 2600 cases fully-documented in accord with the strictest scientific protocols and very convincing Reincarnation and Biology medical monograph, as well as Jenny Cockell’s remarkable story.  I can only say to Clive what I said to Dr. Dickenson:  read the literature!

As for Clive’s airy condemnation of Extra-Sensory Perception, I suggest that he read “Mind Trek”, or other books by my very close friend, former US Army Chief Warrant Officer Joseph McMoneagle.  Joe was Remote Viewer 001 in the US Army’s Stargate Program, based at Fort Meade, Maryland.  He was decorated with the Legion of Merit for his “remote viewing” ability to “see” events and gain information from far away in space (and time!).  Although the 20-year, $20 million Stargate program ended in 1995, following the end of the Cold War, most of Joe’s “psychic spy” work is still classified.

Since his retirement from active service he has established a successful business as a consultant for large corporations that willingly pay for his ESP services.  He is also well-known to TV viewers in Japan for his “remote-viewing” location of missing persons.

As for Clive’s comments on magic, no one questions that suitably-equipped magicians can simulate many if not most ESP phenomena, but that proves nothing.  The fact that people can now fly in airplanes does not mean that there is no such thing as a bird!  Moreover, serious ESP researchers ignore those phony “prize” offers by deniers.  On investigation, these always prove to be so hedged about with craftily contrived conditions as to make it virtually impossible ever to win them.   The deniers then proudly announce that “the prize has yet to be claimed”!

Metaphysically speaking, Clive’s statement that “There is but one life” is absolutely true - but not quite in the sense in which he means it.

John Knowles, Peyia 

PEOPLE WITH savings in cooperative banks across Cyprus yesterday rushed to withdraw their money before the government could implement an all-out haircut on Cypriot deposits, attempting to take advantage of the fact that co-ops are open on Saturdays.  

However, the head of the Central Cooperative Bank Erotokritos Chlorakiotis gave instructions at 7am yesterday to close all cooperatives branches that usually open on a Saturday and to make sure no transactions could be made in an effort to stave off a bank run that would lead to the collapse of the co-op movement.  

European ministers and officials may have thought they’d avoid a bank run by taking a decision on a haircut of Cypriot deposits over the long weekend but they probably were not briefed on the fact that co-ops are usually always open on a Saturday. 

In the coastal town of Larnaca, irate depositors queued early to withdraw money from cash machines and co-op credit societies.

"I'm extremely angry. I worked years and years to get it together and now I am losing it on the say-so of the Dutch and the Germans," British-Cypriot Andy Georgiou, 54, who returned to Cyprus in mid-2012 with his savings, told Reuters. 

One man with savings in the Kyperounda cooperative bank decided yesterday morning to express his anger by blocking the entrance to the coop branch on Nikou and Despina Pattichis Avenue in the Limassol district using his tractor. 

The man told Cyprus News Agency that he felt cheated by the assurances given by the authorities that people’s savings were safe and so parked his digger at the entrance of the bank, causing a little traffic chaos until police convinced him to move the tractor. 

Co-ops opened for an hour yesterday before shutting to prevent a bank run

CYPRIOT banks will transfer their Greek units to Greek owners as part of the island's international bailout agreed earlier yesterday, two government and banking sources in Athens told Reuters.

Cypriot banks account for the bulk of the €0 billion that Nicosia will get from eurozone countries to stave off bankruptcy. In sharp contrast with previous bailouts for other indebted nations, the rescue package is co-funded by levies on bank deposits.

The units of Cypriot banks in Greece, which account for about a tenth of Greece's banking market, were specifically excluded from the levy after a deal to transfer them to Greek lenders, one senior banking source and one senior finance ministry official said.

"They will be transferred to a Greek bank," the finance ministry official said. It was not yet clear which Greek bank would take them over and on what terms.

Greek lenders have themselves been bailed out with up to €50 billion in EU/IMF funds after a Greek debt cut in 2012 severely hit the value of their bondholdings.

The eurogroup said earlier yesterday, without elaborating, that it welcomed "that an agreement could be reached on the Greek branches of the Cypriot banks, which protects the stability of both the Greek and the Cypriot banking systems".

It said this would be done in a way which "does not burden the Greek debt-to-GDP ratio".

Cyprus' two top lenders with a presence in Greece are Bank of Cyprus and Popular Bank. Greek operations accounted for more than a quarter of total group operating income at Bank of Cyprus and 10 per cent at Popular, according to nine-month 2012 results.

According to Greek media reports, Cypriot lenders' assets will be most likely transferred to Hellenic Postbank, a formerly state-controlled lender which was itself bailed out in January.

But a Postbank official told Reuters it was not yet known if this would happen.

Postbank, whose capital shortfall was estimated at €3.7 billion passed into the full ownership of Greece's bank bailout fund (HFSF) with a view to being sold at some point to private investors.

THE AIR of disappointment and rage on Ledra Street yesterday morning was almost tangible with groups of middle-aged men gathering to express their disbelief and fury about the haircut on deposits. 

Social websites and phones were awash with debate and complaints about where this island is headed, whose fault it was and where do we go from here?  

As the Cyprus Mail approached several men gathered by a bench, another passed by and could audibly be heard saying ‘take it all out, even the provident fund’. 

“They shouldn’t touch the deposits.  They’re just killing the people,” 58-year-old Miltiades Papamiltiades, an unemployed former construction worker, said. “They should use our natural gas to pay off our debt, they shouldn’t tax the people, they have to let the people spend money to help the country develop not take their money away,” he added. 

Asked to describe how he felt when he heard the news yesterday morning he replied “I feel indignant, like they have decapitated me,” Papamiltiades said. “No-one will ever deposit money again into the banks on the island. It is the end of our economy,” he added.

Seventy-year-old Nicos Adamou, a jewellery store owner has lived through World War II and the Turkish invasion. “All of the lies that the politicians have fed us over the years are coming back to harm us now,” he said. “Their lies are radioactive,” he added. “How do I feel?” he asked, “I feel bitter and disappointed because our finance minister stated there would be no haircut but here we are,” he added.

It is not only Cypriots who have been affected or will be affected by the proposed measures, and Christos Sarianoglu, a 43-year-old Costa Coffee employee from Greece, who left his home country because of the extreme austerity measures taken there. It would appear that he was not well informed on the latest news though. After explaining the situation to him, the 43-year-old went straight to an ATM to withdraw as much money as he could. “This is truly unacceptable, I came from Greece because I’d had enough of having money taken from here and there and now they’re doing it in Cyprus,” he said. “I’m fed up of this whole situation,” he added.

Amongst the outrage though there was not much talk of a counter-solution about what the president could have done differently until the Mail reached Barrett Costanian, a 39-year-old entrepreneur. “If they wanted to do the haircut they should have set a minimum amount, leaving any deposits less than €30,000 or €40,000 untouched, and taking only from those who have more,” he said. Costanian believed the move by is illogical and that they should have found another solution, as opposed to taking the people’s money. “If they wanted to tax people then tax the millionaires, not the pensioners or those who haven’t got that much saved up,” he added. Costanian believed the real problem is not the haircut in itself as much as the affects it will have on the economy. “Anyone who can move their money will, and that will completely destroy the economy so you can expect things to get much worse from now on,” he said. “I can’t believe they have gone this far and I am angry and disappointed but so is everyone right now and it’s understandable,” he added.

A 23-year-old data analyst, Steve Johnson, was queuing up at an ATM and expressed his shock at the developments. “I have more than €100,000 in savings in various banks on the island and I plan to move it because all of this time I thought I was working for myself not so the government could come and take it away in one move,” he said. Johnson explained that his uncle has saved money up to send his children to study at university and now that money would be taken. “This was not a good option, I believe the government should have found another way,” Johnson said. “It’s a very rough decision by the authorities and one that is difficult to swallow,” he added.

One point of view was that the media must share some of the blame.

“They should have known about it before it happened to let people know, so we wouldn’t look like fools now,” 25-year-old economist, Kristy said. “They took our money while we were sleeping and there is nothing we can do about it,” she added. She felt that although the president was warned not to follow Greece’s example, he has not learned from Greece’s mistakes. “The only thing Anastasiades has managed is to make young people want to get up and leave the country,” she said. “The only word that can describe how I feel, how people I have spoken to feel, is betrayed,” she added. 

The only person the Mail managed to speak to that was not full of indignation was Andreas, a 27-year-old physiotherapist who felt that it is those with a lot of money who have most to lose. “I really don’t know what else could have been done,” he said. “At the end of the day those who have the most money have the most to lose,” he added. “Personally I don’t have much money saved away so I don’t really have much to lose,” he concluded.

A small group of people demonstrated outside the palace

ANALYSTS yesterday echoed the public’s discontent in denouncing the agreement struck in Brussels, though some acknowledged that the government was negotiating with a gun to its head.

“I think it was the wrong decision by the Eurogroup, but also a mistake on the part of the government to accept it,” said Theodore Panayotou, director of the Cyprus International Institute of Management. 

“Deposits are sacred…people put their money in banks for safekeeping. After what just happened, who is going to have any confidence left in the banks?” he remarked.

“The EU made three blunders at Cyprus’ expense. First, they seem to have reneged on their promise that bank deposits would be untouched. Second, their handling of Cyprus was discriminatory, since no other country has been forced to take a haircut on deposits. And third, they displayed a total lack of solidarity toward an EU-member.”

The silver-lining – if one could call it that – is that depositors will get bank shares in exchange for the one-off tax on their deposits:

“Essentially it amounts to a forced investment in bank stocks. True, in the short run the value of bank shares will be nothing to brag about, but I think that in the long run, once the economy stabilises, they could plausibly bring a good return on investment.”

Despite the bad news, Panayotou urged people not to panic and rush to take their money out of the banks, which would only make matters worse.

The government must have been forced to agree to the unprecedented measure because it had its back against the wall, he said.

Economic analyst Stelios Platis was less forgiving:

“It was a failure of the highest order on our part. I think the finance minister should resign, as a minimum sign of respect to the public which only recently went to the polls. And President Anastasiades should explain himself to the Cypriot people.”

Platis forecast the levy on bank deposits and the tax on interest deposits will cause “irreparable damage” to the country’s banking system, as it will almost inevitably drive away foreign bank account holders.

On January 21, the ECB agreed to extend Emergency Liquidity Assistance (ELA) to the two largest Cypriot banks, Popular and Bank of Cyprus, by two more months.

The deadline for ELA expires this coming week.

Sources told the Mail that as negotiations in Brussels threatened to reach an impasse, the Cypriot delegation was presented with a daunting dilemma – either you take a haircut on deposits or we switch off emergency liquidity, sinking your island’s two largest banks and the economy at large.

At that point the Cypriot team had no more wiggle room as it had gone to the Eurogroup desperate to clinch a deal there and then. It seems that some of its European partners then sprung the ELA trap, the sources said.

In a statement released yesterday after the Eurogroup decision, President Nicos Anastasiades hinted that Cyprus was caught between a rock and a hard place.

Evidently alluding to the Popular Bank and Bank of Cyprus, Anastasiades said that they would both have been forced to shut down.

For Alex Apostolides, lecturer of Economic History with the European University of Cyprus, the haircut on deposits is bound to reduce the money supply, which in turn will cause the country’s output to shrink.

Nominal GDP is money supply times velocity of circulation (the number of times money changes hands).

Should the economy shrink it would further hamper the country’s ability to repay the debt, which suggests that a second bailout could be possible.

Panayotou added: “I fail to see why this was a better option than letting the most troubled bank fail. If the bank failed, the state would no longer need to recapitalise it.

“It seems that we averted one disaster – the immediate closure of the banks – but is this going to make the crisis better or worse? In other words, was it worth it agreeing to this bailout? Frankly, I don’t know the answer.”

“The first tenet of liberal economics is the right to private property. That’s why people are so upset about the deposit levy. It’s not so much because they have to pay something, but rather because they feel something they own is being taken away from them.”

Speaking on CyBC yesterday, Sarris sought to play down the notion that Nicosia had capitulated to the lenders’ demands.

The economy chief spoke of a “historically difficult decision,” stressing that the alternative was far worse.

“Some were pressing for a far larger haircut…they were pushing for the banks to close and then see what we could salvage from the ‘good’ loans. They were threatening us with this prospect,” Sarris said of some of his euro-area counterparts.

That would have caused the banks into an uncontrolled default, he said, and the losses on savers would have been several times worse.

PARTIES reacted angrily to the Eurogroup decision, with communist AKEL saying it was contemplating proposing Cyprus’ exit from the common currency, the euro.

However, Communications Minister Tasos Mitsopoulos warned that the alternative was the collapse of the banking sector and bankruptcy.

AKEL leader Andros Kyprianou described Cyprus’ treatment by the troika as “vindictive and neo-colonial,” adding that his party would discuss proposing the island’s exit from the eurozone.

“They are attempting to impose their political options on Cyprus, leading out country and people to conditions that are similar to those in other countries of the European south,” Kyprianou said.

Kyprianou held President Nicos Anastasiades responsible for the developments, saying that his party’s secretariat will recommend rejection of the measures.

Ruling DISY said it was a harsh decision that followed the wrong decision to write-down Greek debt in 2011, which led to huge losses for the island’s banks.

DISY deputy chairman Averof Neophytou said the alternative would be to pay the cost of a disorderly bankruptcy.

“The decision was painful but without the agreement, the situation would probably be tragic,” Neophytou said.

He said he fully understood the people’s concerns, but things had been allowed to get so bad that the options were limited.

“We will weigh the consequences of implementing the proposal and those of rejecting it and make our decisions, having in mind the least painful effects,” he added.

Socialists EDEK slammed the EU for “burying the principle of community solidarity” and the government for its “unconditional surrender” to the absurd and outrageous demands.

“Neither the unprecedented and catastrophic measures would be tolerated nor the humiliation of the Republic of Cyprus and its people,” EDEK said.

Government partners DIKO were cautious in their approach, saying they needed to be briefed on the decision before taking a stance. 

The party nevertheless censured the “unacceptable blackmail” that certain EU circles used to force Cyprus to agree. 

Demetris Syllouris, the chairman of EVROKO, said the government would not have his support on the matter.

“If they have killed us once it does not matter if they kill us a second time. This is my reaction,” he said.

The Green party suggested that the measures included in the decision did not ensure the salvation of the economy.

“On the contrary, the consequences on common people and workers are expected to be tough, adding to the trials this people is already going through,” the Greens said.

President Anastasiades will be briefing party leaders at 8.30 this evening, ahead of a cabinet meeting.

“As soon as he returns to Cyprus he will convene a meeting of political leaders to put before them the facts and alternative scenarios,” Communications Minister Tasos Mitsopoulos said. Asked about the alternative scenario, Mitsopoulos was blunt: “It is the closure of our banks on Tuesday and bankruptcy.”

THE ONE-OFF levy on bank deposits agreed between Nicosia and international creditors will impact all Cypriot account holders.

In addition to Cypriot commercial and co-operative banks, Barclays, Russian Commercial Bank and Societe Generale, among others, would be affected.

“As we understand it, anything with credit will be subject to the levy, be it a deposit or current account,” bank sources said.

The Cyprus deal means the country’s savers, almost half of whom are believed to be non-resident Russians, are asked to pay up to 10 per cent of their deposits to raise some €5.8 billion for the government.

International lenders will put up around €10 billion to help the island pay back its debt.

People with less than €100,000 in Cypriot bank accounts will have to pay a one-time tax of 6.75 per cent, while those with more will have to pay 9.9 per cent.

Euphemistically dubbed a “solidarity levy,” what it amounts to is a haircut on deposits, economic analysts said.

Savers will be ‘compensated’ in the form of bank shares of an equal value to the amount contributed, finance minister Michalis Sarris told the state broadcaster.

In addition to the levy, Sarris said, a 20 to 25 per cent tax will be imposed on the interest on deposits.

And in return for emergency loans, Cyprus additionally agreed to increase its corporate tax rate by 2.5 per cent to 12.5 per cent. 

The deal was reached after late-night discussions in Brussels with the International Monetary Fund (IMF).

In return for the €10 billion bailout, Cyprus has been asked to reduce its deficit, shrink its banking sector and increase taxes.

Bank sources said a run on bank ATMs started from Friday night – while the Eurogroup was in progress –peaking yesterday morning as soon as news broke from Brussels.

“The ATMs are running out of cash,” a source said.

The frenzy of withdrawals was triggered by savers likely thinking that by reducing their bank balance they would reduce their taxable amount.

However understandable, it was probably an exercise in futility, because the taxable amount will apply retroactively, from the moment the deal was struck in Brussels.

Joerg Asmussen, a member of the executive board of the European Central Bank, said the Cypriot parliament would have to legislate on the measure over the weekend and the tax, which he said had already been frozen in deposits, would be removed before banks opened on Tuesday morning.

He said also the Cypriot Central Bank had done “contingency planning” for the event of a run on the nation's banks after the announcement of the extraordinary measures.

Asmussen said Cyprus's banks would have to continue receiving funding the Central Bank of Cyprus's Emergency Liquidity Assistance facility- an expensive lending program -but would be able to access normal ECB financing after they had been recapitalized. 

The ECB official justified the measure by saying it broadened the number of people who will shoulder the burden of the bailout. Without the measures, he said, much of it would fall on Cypriot taxpayers; by going after all large deposit holders – many of whom are Russian or British – outsiders would help fund the rescue.

Greek depositors would not be hit, Asmussen said. Cypriot bank branches would be “ring fenced” and sold off to a Greek bank at a later date.

Before Tuesday – when the banks reopen after an extended weekend – the government hopes to pass three bills in total – one on the corporate tax, another on the levy on deposits and a third on the tax on interest on deposits.

A House plenum was expected to be convened today or tomorrow at the latest; House Speaker Yiannakis Omirou was forced to cut short a visit to London and return to the island last night.

The urgency of the matter mobilised the entire state machinery. Technocrats from the finance ministry, the Central Bank and officials from the Attorney-general’s office were yesterday summoned to the Finance Ministry to begin drafting the items of legislation.

The Association of Cyprus Banks also convened.

The Mail was told also that, as early as Thursday evening, Attorney-general Petros Clerides got a call from Brussels asking him to start working on the bills.

Sources close to the Bank of Cyprus said they had received verbal instructions to suspend internal internet banking.

To avert a run on the co-operative banks the Co-operative Central Bank instructed outlets to lock their systems to prevent transactions. Many branches remained closed for the day; co-operatives are normally open for business on Saturdays.

Queues formed at ATMs islandwide yesterday

THREE weeks ago he was on the podium at the Eleftheria Stadium being applauded and cheered by thousands of flag-waving supporters for his election victory. Today he is the most unpopular man in Kyproulla for agreeing to the haircut of deposits, abused and reviled even by people who only have overdraft accounts and lost nothing.

Poor old Nik inherited the scorched earth left behind by the village idiot and will now carry the can for agreeing to a bailout deal, which is primarily designed to appeal to German voters rather than to help Kyproulla in her hour of need. He is now being accused of ‘unconditional surrender’ to the troikans and of betraying his voters.

He did pledge during his inaugural speech that there would be no haircut of deposits and at another time said that he would ‘never’ accept it. Then again he also pledged to SGO workers, during the election campaign that he would never agree to privatisation of their fiefdoms and he did that as well. 

He was not lying but he had over-estimated his powers in thinking that he could successfully resist the mighty Krauts who had taken the decision to raid our bank deposits long before Nik was elected. Nik was due back to a hostile welcome last night and was to go straight into a meeting with the party leaders, which spared him the ordeal of having to attend any carnival parties.

FRIDAY evening’s Eurogroup meeting that finished in the early hours of yesterday was a set-up, if ever there was one. The group usually meets on a Monday and rarely after European Council, so why was the one that to discuss the Cyprus bailout scheduled for a Friday evening, ahead of a long weekend?

The banks needed to be closed and adequate time given to Cypriot legislators to approve the bills for the deposit haircut. These decisions are always implemented at weekends to prevent panic that would lead to a run on the banks. We should have suspected that there would be haircut when it was announced the Euro group would meet on Friday. (At least the Krauts, showed sensitivity to the island’s time-honoured tradition of no haircuts on Thursdays)

The decision had obviously been taken long before Friday, which is why there were continual press reports about the haircut and the EU big-shots like Schaeuble and Dijsselbloem never ruled it out when asked about it by hacks. 

They had planned our shafting down to the last detail, knowing that Nik would be forced to agree to it, as soon as they threatened to withdraw the emergency liquidity assistance that was keeping Cypriot banks afloat. This was how the EU rescue package that will completely destroy the Cyprus economy was finalised.

OUR EU partners did actually refer to this product of blackmail as a rescue package. This rescue package will drive away all international business from Kyproulla, drastically reduce our GDP and possibly trigger a run on the banks as soon they open on Tuesday. 

Of course things would be 10 times worse without the package because the collapse of the banks would be a certainty, the haircut of bank deposits would be in the region of 70 per cent and the state would have no money to pay the poor public parasites. 

But this is the option most of our political parties seem to prefer if yesterday’s statements by deputies were anything to go by. So there is the likelihood that when deputies are called to vote on the haircut bill today they will reject the trim thus paving the way for a number one. 

Someone should inform them that it is not the Annan plan they would be voting for, because in this case heroic resistance would come at a very high price. The choice is not between change and keeping things as they are – it is between disaster and annihilation, which is a bit of no-brainer.

COURAGEOUS freedom-fighter Yiorkos Lillikas wasted little time in making political capital out of the haircut decision, telling his supporters in Limassol, “unfortunately our fears over the degree of their national resistance were confirmed.” Nik “betrayed in 15 days the mandate he had received from the citizens,” he said.

And of course the only answer was a referendum or the calling of presidential elections to give the heroic Lillikas the opportunity to save the country by blocking the “nationally catastrophic decision”. 

The self-proclaimed national saviour already had a team of economists studying the possibility of a return to the Cyprus pound while he would undertake several initiatives in an effort to secure support from other “friendly countries so that we would not need the troika.” 

He will not attend any carnival parties, which is a shame as he would not be able to wear his Superman outfit this year, because he would be too busy calling friendly countries asking them to send us a few billion euro, before the banks open on Tuesday.

THE PAPHITE superman did not mention which are the friendly countries keen to bail us out. France, which he has a great fondness of, supported the deposits hair-cut so which country did he have in mind? 

Even Greece let us down, refusing to give €2 billion out of the €40 billion it had received from the ESM for its banks in order to help re-capitalise the Greek operations of the Cypriots banks and thus reduce the bailout needs. A Greek bank will reportedly take over the operations of the Cypriot banks in Greece, but negotiations stalled after it demanded to be compensated for this.

Perhaps Yiorkos had our great friend, Mother Russia in mind. This was the country that was supposed to contribute to the bailout, but we are having difficulty convincing the Putin government extending the repayment period of the €2.5 billion loan the comrade secured at 5 per cent interest. 

Russia’s finance minister Anton Siluanov showed as much sympathy for our plight as Shaeuble, saying on Friday that in his talks with our finance minister Michalis Sarris he would demand the names of all the Russians with bank accounts in Cyprus. That would really help us out.

WORSE than Lillikas’ cheap demagoguery, is the boasting by the commies of AKEL who are now claiming that they put up a brave resistance to the troika. 

Comrade Andros was on radio yesterday morning praising Tof for not giving in to the troika, omitting to mention that it was his cowardly comrade’s incompetence, cluelessness and stalling tactics that put us in the mess we are in today.

If Tof had signed a bailout last July, the haircut of deposits might never have been an issue. But his delaying tactics and tough negotiating skills saved CoLA and the 13th salaries. The tough Tof even saved the SGOs from privatisation, but then Nik came and surrendered to the troika.

HOW APPROPRIATE that a few days before the haircut of bank deposits, it was announced that the former CEO of the Bank of Cyprus, Andreas Eliades – the man who together with Laiki’s Andreas Vegnopoulos destroyed the banking sector – would be given €2 million he was owed by the bank’s provident fund.

I hope that at least 10 per cent would be deducted from it as a reminder of his undeniably big contribution to the haircut. The B of C was reluctant to pay off Eliades but he sued every member of the provident fund administration committee and rather than go to court paid him off. He was initially demanding €3.5 million but settled for two.

I suggest that he is invited to collect his money at a special ceremony that should be attended by a couple of hundred holders of the now worthless B of C convertible bonds he sold them. B of C depositors could also be invited so they could personally thank him.  

INSURANCE agents have taken on the role of footballers, receiving obscene signing on fees to switch company. An agent, who worked for the B of C’s insurance company Eurolife, was recently paid a fee close to 400 grand to move to Laiki’s insurance company CNP-Laiki.

CNP-Laiki was willing to pay this silly money because the agent would take all his contacts and customers with him and thus generate more business for it. But the ultimate objective is to weaken its main competitor in the life insurance sector, by depriving it of a successful agent (an agent that earns annual commissions in the region of €150,000).

This cunning plan is the brainchild of the CEO of CNP-Laiki, Takis Phidias who currently is also the CEO of Laiki Bank. He has reportedly set aside €2 million for luring Eurolife agents to his company, now that the B of C is in trouble, with a view to taking a bigger market share. 

There is nothing unlawful in this example of cut-throat capitalism, but who is financing Phidias’ devious plan for domination of the life-insurance market? The majority shareholding of the firm he leads is held by French insurance giant CNP (51 per cent) and the remainder by state-owned Laiki. 

In other words, we the taxpayers that own Laiki are partly funding this costly drive for a bigger market share that will benefit nobody apart from Phidias as it could earn him a big fat bonus on top of his €20,000 a month salary. But using the funds of a state-subsidized bank for personal aggrandizement just doesn’t seem right.

There is one positive thing to come out of the transfer of insurance agents – it has given a touch of glamour to a profession that is more boring than accounting.

CONGRATULATIONS to the pseudo-minister of health in the north for not subscribing to the hideous diktats of political correctness. Asked whether the ‘government’ in the north should consider closing down cabarets he said: “If we close the cabarets, then the 40,000 soldiers would be screwing us.”

At least we can always rely on our European partners to avoid such crude language. So their decision to raid people’s bank accounts and steal a part of their savings was described as “a stability levy” and “a solidarity levy”.  They may have screwed us but they used politically correct terms to describe it.   

EVEN though the haircut of bank deposits had been on the agenda of the EU for more than a month now, featuring in Commission memos and being openly discussed by European politicians, most of whom, refused to rule it out, few people thought the Eurogroup would go ahead with it. It was an idle threat, to force Cyprus privatise SGOs and increase the corporate tax, was the prevailing view. 

And after all, President Anastasiades had emphatically declared in his inauguration speech that “absolutely no reference to a haircut on public debt or deposits will be tolerated,” adding that “such an issue isn’t even up for discussion.” Finance Minister Michalis Sarris made similarly reassuring statements, arguing that it would be lunacy for the EU to impose such a measure because it would threaten the euro system.

Germany and the leaders of the Eurogroup opted for this lunacy, calculating that Cyprus is too small and inconsequential for the haircut on its bank deposits to cause contagion in the eurozone. Of course, the markets could view the decision differently, perhaps not when they open on Monday, but a few weeks later as it becomes apparent that not even deposits in European banks are safe from raids by the Eurogroup.

It is obvious from the statements made that Anastasiades was blackmailed into accepting this euphemistically called ‘solidarity levy’. If he did not accept it, the European Central Bank would not provide Emergency Liquidity Assistance to the Cypriot banks, after the March 21 deadline (it had been extended by two months in January) and the banks would have collapsed on the same day, with people losing much bigger parts of their deposits than the seven to 10 per cent that would be taken now.

Was there an alternative for Anastasiades? It is difficult to say, given the pressure for a political agreement by last Friday. All indications are that our EU partners had taken their decision before then and this was why they scheduled the Eurogroup meeting that would discuss the bailout on a Friday night. The Cypriot banks would be closed for three days during which all the steps for bailing in deposits could be taken, and the banks could re-open normally on Tuesday.

If only things were so simple. It is highly unlikely it will be business as usual at the banks on Tuesday as thousands of people will likely turn up to withdraw their money. Big depositors would give instructions for the transfer of money abroad and never again place it in a Cypriot bank. What would be the capital needs of the banks faced with a mass exodus of deposits, brought on by the Eurogroup decision? Would the EU order another ‘solidarity levy’ in such a case or would it declare Cyprus bankrupt, having dealt a fatal blow to its financial services sector that is by far the biggest contributor to GDP, and kick it out of the eurozone?

Yesterday’s decision still needs to be approved by the House of Representatives, which will meet today or tomorrow to approve the haircut bill. Judging by the statements made by the political parties yesterday the approval of the relevant bills is far from certain. Anastasiades was to meet the party leaders last night in an effort to persuade them to support the bills, but there are already many dissenting voices, not to mention the public outcry, which is bound to affect the stand of the parties.

One deputy yesterday wondered whether it would be better to allow the two banks that required liquidity assistance from the ECB to go under instead of accepting the haircut. But the problem would not be confined to these two banks as there is inter-dependence among the banks and a bank run on two would spread to all. This will be Anastasiades’ main argument in explaining why he agreed to the bail in of deposits. The alternative would have been the collapse of the banks, state bankruptcy and exit from the euro.

Under the circumstances the president opted for the lesser of two evils, even though we doubt there would be many people who would give him credit for that. In effect, the EU offered a ‘rescue package’ that is designed to destroy rather than rescue what is left of the Cyprus economy.

THE DECISION to impose an unprecedented all-out haircut on Cypriot deposits was a painful one, but it was the only option to avoid bankruptcy of the state, said President Nicos Anastasiades yesterday.  

The statement was made after Cyprus woke up to a horrific hangover yesterday morning when it transpired after a marathon ten-hour Eurogroup session that a haircut on all bank deposits would be imposed in Cyprus, along with an increase in corporate tax and a doubling of the tax on interest earned from savings.

The tradeoff was reaching political agreement on a Cyprus bailout to the tune of €10 billion, around €7 billion less than initially estimated, with the participation of the IMF. The loan, unlike the haircut on deposits, will be paid back in cash.  

Overnight, what was previously declared a red line by Anastasiades and Finance Minister Michalis Sarris became a reality. For the first time in the eurozone, a haircut would be imposed, not on state creditors or bondholders, but on everybody with savings in Cypriot-based banks, including small depositors with less than €100,000 in the bank. The move is expected to raise €5.8 billion for which depositors would receive bank equity in return. 

Ironically, throughout the EU, deposits with less than €100,000 are insured by the state, meaning should the banks collapse before the levy is imposed, depositors’ savings- in theory- would be secured.  

This is the fifth aid package prepared by the troika- and the smallest- but the only one where depositors take a hit, largely due to the insistence of Germany and the IMF. 

The deposit levy - set at 9.9 percent on bank deposits exceeding €100,000 and at 6.75 per cent on anything below that - will take place on Tuesday after the bank holiday on Monday. 

To avoid a bank run, electronic transactions were frozen while the Cooperative Movement forced its branches, which are usually open on Saturdays, to close. 

Apart from forcing losses on depositors, the Eurogroup, led by Dutch finance minister Jeroen Dijsselbloem and under the clear direction of his German counterpart Wolfgang Schaeuble and IMF chief Christine Lagarde, also secured an increase in Cyprus’ corporate tax rate by 2.5 per cent to 12.5 percent, and an increase in the tax on interest on savings by 20-25 per cent. 

The euro ministers argued this should boost revenues, limit the size of the loan needed from the eurozone and keep down public debt.

“The solution chosen may be painful, but it was the only one that would allow us to continue our lives without adventures. It's a decision that leads to the historic and permanent rescue of our economy,” Anastasiades said in a written statement.  

The president highlighted that the Cypriot delegation was caught unawares, finding itself before a fait accompli during the extraordinary Eurogroup meeting on Friday night. 

“We faced decisions that had already been taken and came across faits accomplis through which we were faced with the following dilemmas:

“On Tuesday, March 19, we would either choose the catastrophic scenario of disorderly bankruptcy or the scenario of a painful but controlled management of the crisis, which would put a definitive end to the uncertainty and restart our economy.”

Anastasiades said the consequences of rejecting the deal would be the collapse of the Popular Bank because the European Central Bank had already decided to cut its emergency liquidity while Bank of Cyprus would not have been able to avoid the same fate.

“This would have lead 8,000 families to unemployment from one moment to the next,” the president said.

A collapse of the banking sector could have led to an exit from the eurozone and a devaluation of the island’s currency by at least 40 per cent, he said.

Never mind the lost deposits and the billions that the state would have to pay in compensation, he added.

“It is well known that the deep economic crisis and the state of emergency we are in did not come about in the last 15 days when we assumed the country’s administration,” said Anastasiades. But “the severity of the situation does not allow me, and anyone else, to engage in a blame game.”

Instead, the president said he chose a controlled management of the crisis by ensuring the liquidity of the banks and the rescue of the banking system through their recapitalization; saving deposits apart from the levy for which depositors will get shares in the island’s two main banks; saving provident and pension funds and avoiding wage and pension cuts.

He also argued that the current decision will avoid further recession and the risk of a vicious cycle leading to a second memorandum.

Anastasiades returned to Cyprus last night where he planned to meet with party leaders at the presidential palace and later the heads of commercial and cooperative banks. 

This morning, the cabinet will meet to discuss draft bills emanating from the Eurogroup decision, while the president will also meet with the House Finance Committee before addressing parliament and the nation at 11.30am. 

Parliament will hold a plenary session in the afternoon where they will be expected to pass the legal amendments necessary to implement the Eurogroup decision. 

Speaking to state broadcaster CyBC, government spokesman Christos Stylianides said yesterday that the Cypriot delegation came under immense pressure on the issue of a haircut, with Schaeuble and Lagarde initially demanding a 40 per cent cut on deposits. 

He confirmed reports that Anastasiades twice threatened to walk out from the talks until cooler heads prevailed and Germany and the IMF brought their initial double-digit figure down.  

“The situation is serious but not tragic and there is no reason to panic,” he added.

Speaking at a press conference after the long negotiations, Sarris said Cyprus chose the least painful solution. 

“We have managed to avoid any tax on financial transactions that would be catastrophic for our economy,” he said. 

“We believe this was an historically difficult decision, despite its harsh aspects, which averts the disorderly bankruptcy of our country, restores confidence and gives us the opportunity to proceed decisively towards a new beginning,” he added. 

As depositors and banks sobered up to the news, the search began to understand why Cyprus should be the first country in the eurozone to force small depositors to contribute a part of their savings to save the banks and help stabilise Europe’s monetary union. 

Economist Alex Apostolides yesterday argued the decision will have repercussions not just for Cyprus but the eurozone as a whole as it raises huge doubts about the safety of deposits in the eurozone, especially in countries facing serious fiscal pressures. 

The basis of any successful capitalist economy is the protection of the right of personal property, he said. “This decision to punish all savers equally across all banks, regardless of the bank’s solvency, violates this principle,” he added.

According to the Cyprus News Agency, during the ten-hour marathon session, the government had to utilise its connections with other prominent German politicians in an effort to temper Schaeuble’s hard line on a substantial deposit haircut. 

At one point, during the game of brinkmanship, one official reportedly told the Cypriot delegation that if they don’t agree, they can get ready for one of their banks to collapse the next day. 

Speaking to CNA, German media representatives said the tough line followed by Berlin was likely as a result of the negative climate surrounding a Cyprus rescue package and the difficulty of getting any deal through the German parliament. 

For months now, German media, citing German intelligence reports, argued that any rescue package would mainly help save Russian deposits, despite the fact that the majority of deposits are held by non-Russians. 

In a statement issued yesterday, Lagarde welcomed the agreement reached to address Cyprus’ economic challenges.

“The IMF has always said that we would support a solution that is sustainable, that is fully financed, and that appropriately allocates the burden sharing. I believe that the agreed package meets these three objectives,” she said.

Dijsselbloem argued that without the deposit levy it would not have been possible to save Cyprus’ financial sector which, compared with national economic output, is more than twice as big as the EU average.

“As it is a contribution to the financial stability of Cyprus, it seems just to ask for a contribution of all deposit holders,” he said.

President Nicos Anastasiades looking tired and defeated on his way into the palace last night

PARLIAMENT on Sunday postponed an emergency session to discuss a levy on bank savings imposed to partially fund an international bailout needed to stave off bankruptcy.

All meetings were postponed until Monday, the Cyprus News Agency reported. Earlier, President Nicos Anastasiades postponed an informal meeting of lawmakers called for Sunday morning.

Several parties in the 56-member chamber, where no party has an absolute majority, were meeting on Sunday morning to formulate positions over the bank levy. Three parties have already said they will not back the plan.

RUSSIAN President Vladimir Putin called on Monday the proposed levy on banking deposits "unfair, unprofessional and dangerous," his spokesman Dmitry Peskov quoted him as saying.

Peskov said that Putin held a special meeting on Monday to discuss developments in the debt-stricken Cyprus.

"Assessing the possible decision of imposing additional tax by Cyprus on deposits Putin said that this decision, if taken, would be unfair, unprofessional and dangerous," Peskov told Reuters.

Russian Deputy Finance Minister Anton Shatalov said on Monday that plans by Cyprus to impose a levy on bank deposits would be fair if it were imposed on interest earned on deposits.

 "A minimum tax rate of 7 per cent on the deposit and 10 per cent as a maximim, this is of course, big, if it is approved like this," Shatalov told journalists, suggesting that amending the tax to impose it on interest would be fairer.

 "A possible option that has been widely reported suggests a possibility of implementing a 10 per cent levy on the interest rate earned on the deposits."

 "If that were to happen, that would not be that horrible and it would be absolutely fair."

 Shatalov added, however, that he did not pity Russian businessmen operating in Cyprus. The island has been a known tax haven for Russian companies.

"I don't pity our businessmen," he said. "I think they will not like it."

LONDON, March 18 (Reuters) - European shares fell sharply on Monday, with markets rattled by a radical bailout plan for Cyprus which knocked confidence in European banks, though some investors saw the dips as a buying opportunity.

In a departure from previous EU practice that depositors' savings are sacrosanct, Cyprus and international lenders agreed at the weekend that savers in the island's outsized banking system would take a hit in return for the offer of 10 billion euros ($13.07 billion) in aid.

The FTSEurofirst 300 was down 0.9 per cent at 1,192.01 by 0848 GMT, albeit clear of an earlier low of 1,187.98, led lower by a 2.2 per cent drop in banking stocks  - some of the strongest performers in recent months.

The Euro STOXX 50 Volatility Index, or VSTOXX, Europe's widely used measure of investor risk aversion, meanwhile, surged more than 20 per cent.

The index rose as much as 24.4 per cent to an intraday high of 19.57 - putting it on track for its second biggest daily rise since August 2011.

Fund managers and traders, however, reckoned the market selloff would be short-lived.

"The whole Cyprus situation feels to me like a storm in a tea cup and weakness should be bought. This is a message from Europe to Cyprus to stop misbehaving," said Lex van Dam, hedge fund manager at Hampstead Capital, which manages around $500 million in assets.

Atif Latif, director of trading at Guardian Stockbrokers, was of a similar mind: "(This) allows long-term investors to buy back into the market, for those that missed the initial rally,"

"Geopolitical risk was one of the areas we highlighted that would bring the market back to normalised levels. Now we have seen one example of this we do see things being weak for the open then start to push higher up throughout the week."

"There is an attempt to mitigate the burden on smaller depositors, with a zero tax rate," the source told Reuters on condition of anonymity. He said the tax-free level was still under discussion.

Under the terms of a deal brokered with euro zone finance ministers on Friday, Cypriot authorities were to impose a 6.7 per cent tax on bank deposits under 100,000 euros and 9.9. per cent on deposits exceeding 100,000 euros.

Those two coefficients may stay the same, the source said, but added that things could change by the time final legislation is submitted to parliament. 

NICOSIA, March 18 (Reuters) - Cyprus is considering the introduction of a tax-free threshold for smaller bank deposits, a government source said on Monday, in an attempt to win over lawmakers hostile to a bank levy announced over the weekend that is needed to avert a default.

"There is an attempt to mitigate the burden on smaller depositors, with a zero tax rate," the source told Reuters on condition of anonymity. He said the tax-free level was still under discussion.

Under the terms of a deal brokered with euro zone finance ministers on Friday, Cypriot authorities were to impose a 6.7 per cent tax on bank deposits under 100,000 euros and 9.9. per cent on deposits exceeding 100,000 euros.

Those two coefficients may stay the same, the source said, but added that things could change by the time final legislation is submitted to parliament. 

BERLIN, March 18 (Reuters) - Finance Minister Wolfgang Schaeuble deflected blame on Monday for a European bailout deal for Cyprus that foresees hitting small savers in the Mediterraneanisland's banks, saying this solution had not been a German idea and that he was open to it being changed.

"The levy on deposits below 100,000 euros was not the creation of the German government," Schaeuble told reporters in Berlin. "If one reached another solution we would not have the slightest problem."

The Presidential Palace categorically denied that President Nicos Anastasiades had ever had the choice of not taxing deposits under €100,000.

According to a government source, quoted by the Cyprus News Agency, Anastasiades “never had this choice.”

The source said the finance ministry would be issuing a statement on the matter.

Schaeuble added however that it was impossible to solve Cyprus's financial problems without reducing the size of its banking sector.

On Sunday he had said: “Those who did not want a bail-in were the Cypriot government, also the European Commission and the ECB, they decided on this solution and they now must explain this to the Cypriot people."

Schaeuble said the Cypriot business model, of attracting  capital with low taxes and favourable legal regulation, had proven to be unsustainable. But it had been "imperative in the interest of defending our common currency" to offer Cyprus aid.

BRUSSELS, March 18 (Reuters) - Cyprus' parliament has postponed until Tuesday a vote on introducing a one-off levy on bank deposits that aims to raise 5.8 billion euros for the country's bailout, but which could hit smaller savers, a euro zone official said on Monday.

"The vote will take place on Tuesday to allow time for more negotiations," the official told Reuters.

The vote had originally been planned for Monday. 

Meanwhile a source at parliament said the government was suggesting the first 20,000 euros of the bailout be tax exempt, remaining deposits taxed at 6.7 pct up to 100,000 and 9.9 pct exceeding that.

The German government said it was open to changing a bailout deal for Cyprus that foresees small savers in the Mediterranean island's banks taking a hit.

"In order to achieve debt sustainability, a contribution from Cyprus is necessary, a contribution from the banking sector, from depositors and owners," Steffen Seibert, a spokesman for Chancellor Angela Merkel said.

"How the country arrives at this contribution, how it divides it up, was and is up to the Cypriot government," he added. "As I believe the finance minister said last night on television, Germany could have imagined a different solution, a different staggering. But it was not our decision."

EUROGROUP finance ministers will hold a conference call on Monday evening, a German finance ministry spokeswoman said, following a weekend bailout deal for Cyprus that includes a levy on depositors in the island's banks.

ATMs are working as normal and the public can use them, a statement from the Central Bank said yesterday.

Spokesperson for the Central Bank, Aliki Stylianou said that ATMs were refilled on Monday morning and that any problems that occurred were due to the fact that banks do not operate on the weekend adding that bank employees refilled them yesterday. 

Cash machines were emptied on Saturday by members of the public who panicked at the news in the morning that there was to be a haircut on deposits. 

BANKS in Cyprus will be shut on Tuesday and Wednesday pending a decision by parliament to approve a levy on bank depositors, a government source told Reuters.

"Tuesday and Wednesday are bank holidays," the source said. A decree will be released shortly from the Finance Ministry to this effect, he said.

SEVERAL thousand expat Britons with Cypriot bank accounts have had their pension payments frozen to ensure they receive them ahead of a proposed bank deposit tax, Treasury minister Greg Clark said.

Clark told MPs the government was putting pension payments on hold until "at least tomorrow" to "ensure that any payments made by Her Majesty's Government to banks in Cyprus get to the intended recipient".

His statement came as the Cypriot government postponed a vote on the unprecedented one-off bank deposit tax, part of a wider bailout package, until tomorrow.

Cypriot banks will remain closed until Thursday, as today's bank holiday has been extended by two days, the nation's central bank said.

The Cypriot government wants time to amend the deal reached over the weekend, which will raid ordinary people's savings to partly fund a bailout package.

Unlike the previous rescues for Greece, Portugal, Ireland, and Spanish banks, the proposed Cypriot bailout is the first one that dips into people's bank accounts to finance a bailout.

In exchange for 10 billion euro (£8.6 billion) in rescue money, the government proposed a one-time tax of 6.75% on all bank deposits under 100,000 euro (£86,490) and 9.9% over that amount.

The bailout package, which has still to be finalised, involves the International Monetary Fund, European Central Bank and European Union.

But after prompting an outcry from depositors, the Cypriot government is now looking at changing the terms of the deal so small savers lose less, while big depositors pay more.

One proposal is to make the tax more progressive, with a one-time 3% levy on deposits below 100,000 euro, rising to 15% for those above 500,000 euro (£428,505).

Clark reiterated the UK government's commitment to compensate around 3,000 armed forces members stationed in Cyprus for "reasonable losses" incurred from the situation.

And he said several thousand UK pensioners in Cyprus would have their payments temporarily frozen, adding that it is possible to change the designated bank account to receive payments online.

"Any UK pensioners in Cyprus can be assured that their future pension payments are being held safely and a normal payment service will resume as soon as the situation in Cyprus becomes clear," he said.

"However, recipients of these payments are able of course to switch the bank account to which payments are made with immediate effect."

Clark urged anyone wishing to do so to contact the International Pension Centre online. (PA)