The European Central Bank has given Cyprus until Monday, March 25, to reach an agreement with the EU and the International Monetary Fund on a bailout. After Monday, “Emergency Liquidity Assistance (ELA) could only be considered if an EU/IMF programme is in place that would ensure the solvency of the concerned banks,” said the ECB in statement released today (March 21 ). Without the ECB’s liquidity assistance, banks in Cyprus could collapse, essentially giving the Cypriot government the choice to make a deal or bust-out.
The total amount of Romanian money in Cyprus is some EUR 100 million, according to the ECB. This figure excludes holdings of financial institutions, but includes everything else – individuals, households and companies outside the financial sector. The amount held by Romanian companies and individuals in loans from Cypriot banks was higher; around EUR 400 million.
The Cypriot government rejected a bailout deal on Tuesday that would have demanded a one-off tax on deposits in Cyprus’ banks to co-finance a bailout. Initially, all deposits would have been taxed, but an amendment to exclude deposits of less than EUR 20,000 was tabled. Despite the exemption for smaller deposits, the Cypriot parliament rejected the proposal, with not one single MP voting in favor of the plan.
In the most recent draft, the tax would be 6.75 percent on deposits between EUR 20,000 and EUR 100,000, or 9.9 percent on amounts in excess of EUR 100,000. This would apply to the EUR 100 million in Romanian money held by banks on the Mediterranean island.