17 Mar 2013

Osborne’s Cyprus levy troops pledge

Chancellor George Osborne confirms the UK will compensate any British government and military personnel whose bank accounts in Cyprus may be affected by the European Union bailout levy.

Addressing Cyprus on state television on Sunday, President Nicos Anastasiades said the financial troubles facing the country are the worst crisis since the 1974 Turkish invasion.

“The solution we concluded is not what we wanted but is the least painful under the circumstances,” President Anastasiades said on TV.

“I bear the political cost for this, in order to limit as much as possible the consequences for the economy and for our fellow Cypriots.”

European officials said people with less than 100,000 euro (£87,000) in their accounts will have to pay a one-time tax of 6.75 per cent while those with more money will lose 9.9 per cent.

Speaking on The Andrew Marr Show on Sunday, Mr Osborne said: “For people serving in our military, for people serving our government out in Cyprus – because we have military bases there – we are going to compensate anyone who is affected by this bank tax, people who are doing their duty for our country in Cyprus will be protected from this Cypriot bank tax.”

UK customers not affected by levy

Mr Osborne credited Prime Minister David Cameron for ensuring Britain is not part of the bailout and alluded to statements posted on the websites of Bank of Cyprus UK and Laiki Bank UK assuring UK customers that their deposits would not be affected by the levy.

He said: “First of all, that is an example, in Cyprus, if you don’t show the world that you can pay your way.

“That is why in Britain we’ve got to retain the confidence of world markets.

“What I’d say specifically about the Cyprus situation – first of all, we are not part of the bailout because David Cameron got us out of these Euro bailouts when he became prime minister.

“Second, I’d say that the Cypriot banks in Britain – this is important because there are many thousands of people who bank with Cypriot banks in Britain – those banks are not going to be included in this bank tax.”

Cyprus beset by financial difficulties

Mr Osborne also called on people who despair at the UK economy to look at what is going on in Cyprus and realise that economic difficulties are widespread.

“Anyone who thinks Britain is alone in having these challenges should look on their TV screens, look at tonight’s news, realise that it’s a very tough economic situation out there,” he said.

On Saturday, Kevan Jones, Labour’s shadow armed forces minister, called on ministers in the UK to reveal whether they had fought to exempt British forces personnel in Cyprus to be made exempt from the levy.

“There are thousands of UK service personnel and their families based in Cyprus who could be impacted by this. Some may have served in Afghanistan,” he said.

“Ministers must tell us how many personnel and their families could have their savings docked and whether they argued for exemptions for our forces. If not, the country will be angry and will want to know why not.

Forces families hit by other cuts

“Service families have been hit by cuts to allowances and permanent reductions in pensions by the government.

“If our forces’ savings are raided while they are stationed in Cyprus as part of their military service, the whole country will be outraged.

“Our heroes should not lose out while serving their country.”

There are 59,000 British residents in Cyprus and 1.1 million Britons visit the island every year, the Foreign Office said.

Cypriot bank officials said that depositors can access all their money except the amount set by the levy, and officials added that withdrawing funds yesterday would not reduce anyone’s levy.

Bank of Cyprus UK assured customers in the UK that their deposits would not be affected by the levy, as it is a UK bank and is protected by UK financial regulation.

Bank of Cyprus UK said on its website on Saturday: “Whilst the measures agreed include an up-front one-off stability levy on deposits in Cyprus, there is no effect on deposits with Bank of Cyprus UK Limited which is a UK bank.”