LARNACA (Cyprus): Under the palm trees of Larnaca’s waterfront promenade, George Kyprou was staring out to sea and scratching his head. “I don’t know what to do,” he said. Like most Cypriots, he was astonished to wake up one bank holiday weekend morning to discover the government had seized up to 10 per cent of everyone’s savings from their bank accounts without warning.

Kyprou, 62, born in Larnaca, had worked most of his life as a chauffeur and driver in England, proudly buying his London council flat and scrimping to put aside money in Cyprus for when he returned for holidays and eventually to retire. “I’d put aside GBP50 here, GBP20 there, all my life,” he said. Over decades, he had built up around EUR6,000 in a Larnaca account.

“It was a state building society; I assumed it was safe.”

But now, as depositors holding less than EUR100,000 are made to pay 6.75 per cent and those with more than EUR100,000 9.9 per cent as part of a EUR10bn bailout agreed in Brussels, Kyprou stands to lose EUR400 overnight. “That’s a lot for someone like me,” he said.

When he heard the news on Saturday morning, he rushed to the cashpoint and queued with others who were panicking and trying to take out as much money as they could. The media reported a run on ATMs that were depleted by mid-afternoon. But with Cyprus taking immediate steps to prevent any money transfers over the weekend, ordinary savers realised there was little they could do to lessen the blow.

Yesterday (Mar 17) the parliament of Cyprus postponed a crucial debate and vote on the move until today, without giving a reason. Banks will remain closed for several days because of the holiday.

In Larnaca, the third largest city on the tiny eastern Mediterranean island, the queues at cashpoints had shrunk by last night but the mood was one of shock, anger and injustice.

Only three weeks ago, Cyprus voted in elections where, for once, the island’s defining issue of its 40-year-old division into the Greek-speaking south and the Turkish north was overtaken by more urgent worries.

The country of 1.1 million people had been ravaged by its worst economic crisis since the 1970s, with unemployment at a record high of 15 per cent and fears of meltdown in a bloated banking sector which was more than eight times the size of the nation’s economy.

The Conservative winner Nicos Anastasiades promised at least that savers’ deposits were safe. This weekend he accepted bailout terms that turned that promise on its head.

Stelios Zinga, a truck driver in his late 50s, had joined the cashpoint queues. “People are panicking, they’re afraid of losing their money, they don’t feel they can trust banks anymore,” he said. “The problem with this levy is that it is the cautious, working-class people who are being made to pay.”

His work as a driver had already suffered from the economic downturn, and he now felt it would plummet. The classic Cypriot education ethic, where hard-saving parents supported their children studying abroad, would feel the strain, he said. “My son is studying chemical engineering in Edinburgh. I’m worried I won’t be able to get money to him.”

Christiana Konteati, 26, a lawyer, who finished a degree in London three years ago, said: “We’re really worried that this is only the beginning: next will come salary cuts, austerity, rising unemployment and very likely people going abroad to work.”One Larnaca bank employee, 28, found the bank levy an “extraordinary” surprise. “Are we the guinea pigs? There’s a feeling they are trying this out on us before they do it elsewhere.”

Further along the promenade, some bristled at the charge in Europe that Cyprus, flush with Russian cash, was a conduit for money-laundering and that the European decision-makers felt the rich Russian depositors should be made to pay. More than 25 per cent of bank deposits and about one-third of foreign investments in Cyprus come from Russia. So many Russians now live in Limassol that it has been dubbed “Limassolgrad”.

Many felt resentment at the EU and its financial decision-makers would grow. Others wondered whether a better solution was the discovery of gas deposits that amounted to more gas than Cyprus could use in over a century, and which it hopes to begin exporting by 2018, potentially meeting a major part of the EU’s annual demand.

By arrangement with the Guardian