UK troops hit by Cyprus bailout 'will be compensated'

William Hague, the foreign secretary, later echoed the Chancellor's pledge. Speaking on Sky, he said that the Government was currently working on details of the compensation.

Thousands of British savers, including armed forces personnel, are to be hit by a eurozone tax on Cypriot banks after the island?s ?8.7bn bail-out.

Approximately ?2bn (?1.7bn) of British deposits held in Cyprus will be subject to a levy of up to 10pc.

British-born Cypriots and their families, some of the UK?s 3,500 service personnel on the island and holiday home owners with savings locally are likely to be affected. The tax will raise ?5.8bn to refinance the country?s ailing banks, in addition to the eurozone funds. The Government is considering reimbursing some of those affected.

In a departure from previous eurozone bail-outs ? the Mediterranean country is the fifth to have turned to the eurozone for financial aid ? savers are being asked to make sacrifices in a move which critics say sets dangerous precedents.

As well as the levy on savers, the Cypriot government has also agreed to increase its corporation tax rate by 2.5 percentage points to 12.5pc to boost revenues.

Further measures include bank restructuring, a ?bail-in? of junior bondholders (where some of their debt will be turned into less valuable equity) and the increase of the taxes on capital income.

The deal means that savers will be forced to sacrifice up to 10pc of their deposits.

After a bank holiday in the country on Monday, the levy on bank deposits will come into force on Tuesday. The emergency levy will be 9.9pc for deposits over ?100,000, and 6.75pc for lower sums. Depositors will receive bank equity as compensation.

Government sources on Saturday night stressed that funds in the London branches of Bank of Cyprus UK and Laiki Bank would not be affected. The value of those funds is not known, however. Treasury officials said that ?deposits in UK subsidiaries and branches [of Cypriot banks] aren?t affected? by the measure.

Source: http://telegraph.feedsportal.com/c/32726/f/579300/s/29a87643/l/0L0Stelegraph0O0Cfinance0Cfinancialcrisis0C99355960CUK0Etroops0Ehit0Eby0ECyprus0Ebailout0Ewill0Ebe0Ecompensated0Bhtml/story01.htm

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