Instead of a tax of up to 80 percent on big banks accounts, Cyprus Finance Minister Michalis Sarris said that a confiscation tax should have been levied on all depositors in the country’s banks, including those under 100,000 euros ($130,000) that were allegedly guaranteed against loss by the government.
Sarris told the state broadcaster Rik that the original plan he agreed with international lenders who wanted a confiscation in return for a 10 billion euros ($13 billion) bailout would have been a “success” and prevented the closing of the Laiki Bank. He said he wanted the government to seize 6.75 percent of all deposits under 100,000 euros as well a 9.9 percent above that limit, but the Parliament rejected it, 36-0.
That forced the government to work out another deal that has led to the huge seizure of big bank accounts and a restructuring of the bank system that will shut down Laiki and wipe out its bondholders to pay for mistakes the country’s banks made in bad loans and big holdings in Greek bonds that were devalued 74 percent.
“The first Eurogroup agreement was a great success,” said Sarris. He had been Chairman at Laiki and said that the bank’s problems started in 2007. “It fell into the hands of people who loaned huge, uncontrolled amounts, mainly in Greece,” said Sarris.
In 2006, Marfin Investment Group from Greece, led by businessman Andreas Vgenopoulos, launched the takeover of Laiki, which was merged with Marfin and Egnatia banks. The Cypriot state acquired and 84 percent stake in Laiki last year after recapitalizing the troubled lender.
Sarris said the bank had been placed on “life support” for the last two years in anticipation of Cyprus agreeing a rescue package with the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB).
In his interview, the finance minister also refused to rule out cuts to wages and pensions in Cyprus and said that taxpayers may continue to be forced to keep bailing out the government and the banks who caused the crisis. No one has been charged with any wrongdoing for the decisions that led to the banks downfall.