It appears that Cyprus has pulled back from the brink of bankruptcy, after agreeing at the last minute a bail out deal with the EU in Brussels. Cyprus is home to over 18,000 British expats on a permanent basis, and even more Army personnel who live their temporarily. There is no doubt that Cyprus’s financial difficulties will have both long term and short term impacts on British expats and their finances.
Bail Out Agreement
Under the terms of the agreement with the EU, anyone who has more than 100,000 euros in a Cypriot bank account stands to lose a substantial amount of their savings in a one-off tax. This rule applies to everyone, whether they are a Cypriot resident or not. UK expats with fewer savings are not affected, but many people who have saved hard to fund their new life or retirement face being hit hard by the tax. The only help being offered by the UK government is to guarantee deposits of UK Army personnel who are in Cyprus and have opened accounts there as part of their military duties.
When the Cypriot crisis started, the UK government took the immediate decision to suspend all pension payments into Cyprus bank accounts, asking UK pensioners resident in Cyprus to nominate a UK bank account for their payments instead. Only a third of pensioners have access to a UK account though, leaving as many as 12,000 people unable to access their pensions and suffering considerable financial hardship as a result. Even with access to a UK account, there is still the problem of transferring the money to Cyprus and accessing it with a debit card, especially as the banks have been closed since the crisis started.
Cash, Credit and Debit Cards
The crisis in Cyprus has seen a return to a cash-only society, with it becoming common practice for retailers and other businesses to insist that bills be settled with hard cash rather than by credit or debit payments. If you can get to the cash machine and withdraw funds then this may not cause hardship, but with banks limiting the amounts which can be withdrawn and internet transfers almost impossible, many residents are finding it difficult to get hold of enough cash to carry on their day to day business, even with healthy bank balances. The confidence in the banking system has been shaken to the core, and there is no guarantee that things will get back to normal any time soon.