It looks as though the Russians are going to get whacked.
Government leaders in Cyprus worked well into the evening yesterday on a series of measures aimed at saving two large banks and raising enough cash to keep the bailout money flowing from Europe.
Under one plan expected to be voted on over the weekend, uninsured bank accounts — those holding more than $128,894, or 100,000 euros — would face a tax of around 20 percent.
Most of those accounts are controlled by Russians, who own about 30 percent of all deposits in the island nation.
Cypriot officials are under the gun to meet a Monday deadline for coming up with as much as $7.5 billion the so-called troika — the European Union, the European Central Bank and the International Monetary Fund — are demanding to keep their bailout cash flowing.
Without the cash, most Cyprus banks would go bust.
In a late-breaking deal yesterday, Cyprus lawmakers approved legislation to wind down banks. It will result in losses for large holders of Cyprus Popular Bank, the nation’s second-largest lender, President Nicos Anastasiades said yesterday.
It could take many years for depositors hit by Popular Bank’s restructuring to make any recoveries, said Averof Neophytou, deputy president of Anastasiades’ ruling Disy party.
“They will wait for many years before they see what percentage they will get back from their savings,” he said.
Nearly one-third of the money in Cyprus banks was deposited by Russians looking to take advantage of the country’s low taxes and lax banking laws.
Some $25 billion of Cyprus’ estimated $90.9 billion in bank accounts come from Russian corporate accounts, Moody’s said.
On Tuesday, Cyprus rejected the troika’s $12.5 billion bailout offer because it required the island to raise $7.5 billion of the bailout money through an onerous levy on depositors.
But yesterday Cyprus was forced to turn back to the troika — and reconsider the bank deposit tax — because Russia flat out rejected the troubled island’s pleas for financial assistance.
Now, Russia will pay the price in the form of a plan that could tax Cyprus’ largest bank depositors, many of them Russians, at a higher rate than the previous plan of 9.9 percent.
German Chancellor Angela Merkel has resisted a straight-up bailout of Cyprus in large part because its banks have a reputation for attracting money-launderers and tax evaders.
But Putin has called the tax “unfair” and “dangerous.”
The levies have also raised eyebrows in the US and across Europe, where depositors in weak countries like Spain and Portugal fear they could be next.