Posted April 4, 2013 by Jessica Wright in Business

Time ahead will be “challenging” for Cyprus

Time ahead will be “challenging” for Cyprus
Time ahead will be “challenging” for Cyprus

Last week, Cyprus agreed in principle to implement certain measures which will make it eligible for the 10 billion Euro bailout package extended by the the Central Bank of Europe and the International Monetary Fund to save Cyprus’s economy from collapsing. Cyprus’s goal will be to raise 5.8 billion Euro that will also go towards helping it avoid financial meltdown.

The International Monetary Fund will account for 1 billion Euro, and says that the measures which Cyprus has agreed to are of a “challenging” nature and “great efforts” will be required on the part of the Cypriot population to make them work well. The IMF’s managing director, Christine Lagarde, said the country would need to pull together if it wants to see itself out of this crisis.

An example of how difficult these measures will be is the tax rates. Income will be taxed at a rate of 30 percent now, and corporate taxes will go up from 10 percent to 12.5 percent. Cyprus was considered as something of a tax haven till recent months, when its way too large banking sector showed very obvious signs of weakening.

Other than the tax rates, the issues related to Cyprus’ two largest banks have also given rise to much debate in the country. The island nation’s second largest bank, the Cyprus Popular Bank, or Laiki, is to be closed, and its good assets will become part of the Bank of Cyprus.

The bank deposits which amount to more than 100,000 Euro will be subject to taxation and other measures. This means depositors can expect heavy losses if they have money in these banks: some experts calculate this loss could be equal to 60 percent of the savings. However, the IMF has assured the depositors that in all probability, 95 percent of the deposits will be protected. Deposits which amount to less than 100,000 Euro will be protected under European Union laws relating to finance and banking.

Besides these measures, there are also a number of capital controls in place, which will be lifted gradually. No individual can currently carry more than 1,000 Euro out of the country, and many people’s attempts to smuggle cash worth over 200,000 Euro by way of boats were foiled in the last few days. Similarly, there is a limit on the amount of cash which may be withdrawn from banks.

Soon after negotiations with the other Eurozone nations and the International Monetary Fund were completed, the Finance Minister, Michael Saaris resigned from his post. The new Cypriot Finance Minister, Harris Georgiades, in his first address to the country said that he would do his best to see that the country managed to meet its commitments to the other EU members.

Jessica Wright

Jessica Wright graduate of Northwestern University getting both Bachelor’s and Master’s Degrees in Broadcast Journalism. Jessica has been Senior Correspondent focusing on the impact of political decisions and office holders. Jessica is our seasoned investigative, political and community-oriented reporter and columnist whose work has won awards locally, statewide and nationally. Her awards have come from the National Federation of Professional Writers, the Ohio Newspaper Association, the Cleveland Press Club.