Cyprus will relax requirements for citizenship, including for bank depositors who lost large amounts of money in the deal with the EU and IMF, in an effort to keep foreigners interested in investing in the island state, the president said on Sunday.
Cyprus was forced to wind down one major bank and impose considerable losses on large depositors in a second bank in return for 10 billion euros in aid from the International Monetary Fund and the European Union in a move that was devastating to both Cypriots and foreign investors.
Euro zone finance ministers approved the aid on Friday.
In prepared remarks to Russian businesspeople in the port city of Limassol, President Nicos Anastasiades said his cabinet would this week approve the relaxation of restrictions on foreigners seeking citizenship of Cyprus, an EU member since 2004.
Non-resident investors who held deposits prior to March 15, when the plan to impose losses on savers was first formulated, and who lost at least 3 million euros would be eligible to apply for Cypriot citizenship, he said.
Cyprus's existing "citizenship by investment" program - similar to that of many countries - would be revised to reduce the amount of investment required to be eligible for the program to 3 million euros from the previous 10 million euros.
"These decisions will be deployed in a fast-track manner," Anastasiades said in the address.
Other measures were also under consideration, he said, including offering tax incentives for existing or new companies doing business in Cyprus.
Anastasiades, whose center-right government has been in power for less than two months, said countries who accused Cyprus of being a money laundering hub for businesses from countries such as Russia were being hypocrites, since those same countries were now trying to lure foreign businesses away.
Used to robust growth and a thriving financial services sector, Cyprus is now bracing itself for record unemployment and at least a 12 percent drop in output this year.
Cyprus, one of the euro zone's smallest economies, modeled itself as a competitively-taxed financial services center with a network of treaties to avoid double taxation.
That model is now threatened by the fact that bailout conditions have left its two main banks crippled, but also forced Cyprus to increase its corporate tax to 12.5 percent from 10, which had been the lowest in the euro zone.
The bailout, first requested in June 2012, was delayed partly because of concerns expressed by euro zone states, notably Germany, that its financial sector was opaque, thus aiding money laundering.
But Cyprus was neither a money laundering hub or a tax haven, Anastasiades said.
"What saddens - I refrain from using the word angers - me deeply is that since the euro group agreement was reached, some EU partners' businesses involved in the financial services industry have been preying upon our financial services sector, in order to encourage a relocation of funds into their economies," he said.
It was an irony and an "absurd paradox" that the governments of those businesses claimed those funds were deposited and invested in Cyprus through illicit means.
"I am a firm believer in the rules of the free market, but allow me to comment on the hypocrisy of such methods," Anastasiades said.