Cyprus tries to rework divisive bank tax

Reuters
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Rough Cut (no reporter narration).

The announcement at the weekend that tiny Cyprus would impose a tax on bank accounts as part of a 10 billion euro ($13 billion) bailout broke with previous European practice that depositors' savings were sacrosanct.

Ahead of the vote in parliament, the government was working on a plan to soften the blow to smaller savers, by tilting more of the tax towards those with deposits greater than 100,000 euros. The government says Cyprus has no choice but to accept the bailout with the levy on deposits, or go bankrupt.

Residents on the island emptied its cash machines to get their funds over the weekend. The move not only infuriated Cypriots, it unnerved depositors in the euro zone's weaker economies and investors fearing a precedent that could reignite market turmoil.

Brussels has emphasised that the measure is a one-off for a country that accounts for just 0.2 percent of European output. The worst fear is that savers in other, larger

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