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Friday, 26 April 2013
ECB Data to Show Extent of Capital Flight in Cyprus
By Stefan Riecher - Apr 26, 2013 3:00 AM GMT+0400
The European Central Bank will publish data today showing how much money savers withdrew from the euro region’s banks after a botched attempt to tax Cypriot savers as part of a European Union-led bailout.
The ECB will publish data for euro-area bank deposits including Cyprus after 10 a.m. in Frankfurt. In February, the month before the rescue, Cypriot deposits decreased 2.2 percent to 46.4 billion euros, down from 47.4 billion the previous month. It was the ninth straight decline.
Pedestrians pass a euro sign sculpture outside the European Central Bank (ECB) headquarters in Frankfurt. Photographer: Ralph Orlowski/Bloomberg
A customer holds her head in her hands outside an automated teller machine (ATM) operated by Cyprus Popular Bank Pcl, also known as Laiki Bank, in Nicosia on March 28, 2013. Photographer: Simon Dawson/Bloomberg
Cypriot officials, euro-area finance ministers and the ECB agreed mid-March on an unprecedented measure to impose a levy on deposits of less than 100,000 euros ($130,000) under a 10 billion-euro bailout. The plan was ditched after the country’s parliament rejected it, and a new accord was reached where only savings above the insured level of 100,000 euros will be taxed.
“I’m sure Cypriot banks have seen a deposit flight last month and it would be even more interesting to see how much money left the country in the second half of the month,” said Christian Schulz, an economist at Berenberg Bank in London. “The deposit data for other countries will tell us a lot about how much damage the incident in Cyprus has done.”
The episode damaged investor confidence across the currency bloc. The Stoxx Europe 600 Banks Index (SX7P) dropped 6.8 percent between March 15 and March 27, the day before banks reopened in Cyprus with limits on withdrawals.
To impose a levy on insured depositors “was not smart, to say the least,” ECB President Mario Draghi said on April 4. “It was quickly corrected.”
The rescue attempt came at a time when doubts about a recovery of the euro-area economy later this year were growing, and Draghi said on April 19 that he hasn’t “seen any improvement in the situation” since the beginning of April.