Irish deposits ‘will not be targeted’ for Cypriot-style tax

Under no circumstances will deposits in Irish banks be targeted for a Cypriot-style tax, the Government has insisted.

Minister for Agriculture Simon Coveney stressed he was being "clear as crystal" that Irish savings were safe. He made the comments during heated exchanges in the Dáil on the bailout deal for Cyprus, rejected by its parliament but supported by the Irish Government and other euro zone member states.

Fianna Fáil finance spokesman Michael McGrath called on the Minister to give an absolute assurance to the Irish people "that under any circumstances there is no suggestion in the future if our banks require further recapitalisation that the proposal that is on the table in Cyprus will be put on the table in Ireland ".

Mr McGrath said the proposal for Cyprus was a serious mistake and EU finance ministers got it badly wrong. The decision to “dip into” the deposits had resulted in a message across the euro zone that bank deposits are no longer sacrosanct in the euro zone. “A rubicon has been passed and a dangerous precedent set,” he said.

Mr Coveney told him: “Let me give an absolute guarantee on behalf of the Government that under no circumstances, will this Government look to introduce a Cypriot-style levy on deposits for any purposes in terms of raising money.

“I have spoken to the Finance Minister on this and I am clear as crystal from a Government point of view that we will not be targeting bank deposits for any purposes as a Government,” the Minister said.

Mr Coveney, standing in for the Taoiseach who is on Government business in the United States, rounded on Mr McGrath and accused him of turning the crisis in Cyprus into a problem for Ireland.

He said the Cork South-Central TD was being “irresponsible” and his claims were not founded in fact. He claimed Mr McGrath was turning the issue into “some kind of scaremongering session for Ireland and Irish banks”.

He said “there is absolutely no evidence to suggest that what is happening currently in Cyprus is having an impact in Ireland”.

The Minister said it was Cyprus and not the EU which called for the deposits of those with savings under €100,000 to be targeted for the levy. The decision “to raid deposits” was proposed and decided by Cyprus. They looked to introduce a one-off levy on deposits under €100,000. He said the European commission had made clear before the vote in the Cypriot parliament that an alternative solution would be acceptable “preferably without a levy on deposits below €100,000. The Cypriot authorities did not accept such an alternative.”

Sinn Féin finance spokesman Pearse Doherty said "we are now in a farcical situation, in that a eurozone country cannot even reopen its banks''.

“Depositors in many European states are afraid because the line has been crossed by the Eurogroup, in that levies can be imposed on depositors.’’

The Irish Government, he said, should not have signed up for such blackmail.

It was foolish in the extreme for Ireland, with its corporation tax rate in the firing line, to agree to a deal that would have forced Cyprus to increase its rate from 10 per cent to 12.5 per cent.

“Why was the Government a party to forcing Cyprus to raid the savings of EU citizens in order to pay for others’ banking mistakes while letting senior bondholders off scot free ?’’ he added.

Mr Coveney said it was important people did not try to muddy the waters. As part of an agreement to finance a programme in Cyprus, it and other countries in the Eurogroup signed up to an increase in its corporation tax rates.

“The deputy will remember there was significant pressure on Ireland to do the same before, during and after our bailout negotiations,’’ he added. “To the credit of the last government, we resisted that pressure.’’

He said that Cyprus now had a responsibility to find an alternative way to raise money.