Cyprus Postpones Vote On Savings Raid Bailout

Cyprus has delayed a vote on whether savers will have to pay a levy on their bank deposits as part of an EU bailout.

The island's parliament had been due to decide whether to back the radical move later on Sunday but has pushed back the vote until Monday.

The delay came as Britain promised any UK government and military personnel would be compensated if their personal accounts were hit.

Chancellor George Osborne told the BBC's Andrew Marr show: "People who are doing their duty for our country in Cyprus will be protected from this Cypriot bank tax."

Around 3,500 British military personnel are based in Cyprus.

George Osborne promises British troops will be protected

But there are tens of thousands more British residents in the country who do not fall into that category and will end up out of pocket.

Under the terms of the 10bn euro (£8.6bn) bailout by the eurozone, savers in Cyprus have to hand over up to 10% of their deposits.

The one-off levy has sparked anger in the eastern Mediterranean island, with queues at cash machines battling to withdraw their money.

Electronic transfers were blocked and the country's cooperative banks had to shut their doors after seeing a rush of savers keen to protect their money.

Christos Demetriades, 58, who was outside a shut Nicosia co-operative bank branch, said: "Politicians and senior bank bosses have covered each other's backs for years, now it's ordinary people who are paying the price and are being punished."

One disgruntled customer at a branch in the southern coastal town of Limassol briefly parked his tractor in front of its shut doors in a show of frustration.

The move marks the first time the 17 eurozone countries and the IMF have dipped into people's savings to finance a bailout.

An informal meeting earlier this morning for parties in the 56-member chamber to discuss the bank levy was also postponed by newly-elected Cypriot President Nicos Anastasiades.

He has said refusing the bailout would lead to the collapse of the island's two largest banks, badly burnt by their exposure to bailed out neighbour Greece.

Cypriot leader Nicos Anastasiades with Angela Merkel in Brussels

The tax on deposits in Cyprus, which accounts for only 0.2% of the eurozone's economy, is expected to raise up to 6bn euros (£5bn).

Those affected will include rich Russians with deposits in Cyprus and Europeans who have retired to the island as well as Cypriots themselves.

The size of foreign deposits in Cyprus - estimated at 37% of the total - was one reason the eurozone agreed to the tax on savings, to take effect when banks reopen on Tuesday.

It will apply to all deposits held in banks within Cyprus, including an estimated 2bn euros (£1.75bn) of British money, according to the European Central Bank.

It will not affect deposits held in the UK branches of Cypriot banks, such as Bank of Cyprus, whose UK subsidiary is regulated by the Financial Services Authority.

However, Laiki Bank UK said on its website: "Your eligible deposits with Laiki Bank UK are protected up to a total of 100,000 euro (£87.000) by the Cyprus Deposit Protection Scheme and are not protected by the UK Financial Services Compensation Scheme.

"Any deposits you hold above the 100,000 euro limit are not covered."

Cyprus was badly hit by the Greek financial crisis because of its close links to the country.

Its two largest banks saw combined losses of 4.5bn euros (£3.8bn) - equal to a quarter of the island's gross domestic product.

The rescue package was agreed after 10 hours of talks in Brussels and was significantly less than the 17bn euros (£14.7bn) asked for.

As part of the deal, the government will also have to hike corporate tax to 12.5% from 10% and sell off state assets to help balance the public finances.

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