If Vladimir Putin was angry when the haircut was at 10% for big depositors, what do you think he’s going to say about the government of Cyprus absconding with 25% of bank deposits over 100,000 euros?


Cyprus said on Saturday it was looking at seizing a quarter of the value of big deposits at its largest bank as it races to raise the funds for a bailout from the European Union and avert financial collapse.

Finance Minister Michael Sarris said “significant progress” had been made in talks in Nicosia with officials from the European Union, European Central Bank and International Monetary Fund.

He confirmed discussions were centered on a possible levy of around 25 percent on holdings of over 100,000 euros at Bank of Cyprus, and expressed hope that a package could be ready by the end of the day for approval by parliament.

Cyprus faces a Monday deadline to clinch a bailout deal with the EU or the European Central Bank says it will cut off emergency cash to the island’s over-sized and stricken banks, spelling certain collapse and a potential exit from Europe’s single currency.

Amid signs of momentum, Cypriot and EU officials said Cypriot President Nicos Anastasiades was expected in Brussels on Sunday to meet EU leaders including Council President Herman Van Rompuy and Commission President Jose-Manuel Barroso, as well as IMF Managing Director Christine Lagarde and the head of the ECB, Mario Draghi.

Van Rompuy and Barroso canceled a planned EU-Japan summit in Tokyo to tend to the Cyprus saga and euro zone officials told Reuters that the bloc’s 17 finance ministers would meet on Sunday afternoon.

“Significant progress has been made in the direction of getting a deal, at least at the troika level,” Sarris told reporters.

He said a number of issues were still outstanding, but that a package could be ready “late this afternoon or early evening” for approval by parliament.

Putting the depositor haircut back on the table became necessary when Russia, fearing the instability of the Cyprus banking system, refused to bail out the wobbly institutions until after the EU infusion of cash. With this new plan to skim a quarter of the value of big depositors — many of them Russians — it is unknown if any company in Russia is going to have the desire to help the Cypriots out with their financial crisis.

Cyprus has taken additional steps to reform the banks:

Racing to placate its European partners, Cypriot lawmakers voted in late-night session on Friday to nationalize state pensions and split failing lenders into good and bad banks.

They also gave the government powers to impose capital controls on banks, anticipating a flood of money from the island when banks are due to reopen on Tuesday after more than a week of lockdown.

The plan to nationalize semi-state pension funds has, however, met with resistance, particularly from Germany which made clear that tapping pensions could be even more painful for ordinary Cypriots than a deposit levy.

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