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Cyprus’ refusal to impose deposit tax signal to others to avoid such moves

March 20, 2013, 22:23 UTC+3
Cyprus is not the first Eurozone country to have found itself in such a difficult situation
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MOSCOW, March 20 (Itar-Tass) – The Cypriot parliament’s refusal to impose a bank deposit tax sends a strong signal warning against attempts to put in place similar constraints in other Eurozone countries, Russian Permanent Representative to the European Union Vladimir Chizhov told Russia 24 television channel on Wednesday, March 20.

“Cyprus is not the first Eurozone country to have found itself in such a difficult situation. This is its fifth request for EU help, but this is the first time that the troika of the European Commission, the European Central Bank and the IMF offered such a recipe to the Cypriots,” he said.

“Obviously, a crisis must be a hard time for an economy where bank assets are eight times its GDP. Cyprus turned, was turned by a purposeful policy of the previous governments into an international financial centre, which secured a rather high level of prosperity, along with agriculture and tourism,” Chizhov said.

“A natural consequence of that transformation into a financial centre was a high degree of dependence on financial institutions of other countries, primarily Greece. As long as everything was fine in Greece, Cyprus had no problems, but when banks in Greece started closing down for reasons we all know about, this reverberated in Cyprus as well,” he said.

When the host noted that “no one proposed to seize a part of people’s bank deposits in Greece,” Chizhov said, “That’s’ the difference.”

“Why this was done has yet to be figured out. If Cyprus was used as a pilot project, I think the outcome of yesterday’s vote in the House of Representatives, where no one supported this decision [to impose a one-time tax on bank deposits] sends a strong signal to all those who might want to repeat this experiment in other Eurozone countries.”

“The risk of the domino effect always was and still is in the Eurozone,” he added.



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