Government has flexibility on implementing tax, says EU

European policy makers yesterday signalled flexibility on the application of an unprecedented bank tax in Cyprus, seeking to overcome outrage that threatens to derail the nation’s bailout.

While demanding that the levy raise the targeted €5.8bn, finance officials said easing the cost to smaller savers was up to Cyprus. A vote on the tax, needed to secure €10bn in rescue loans, was delayed for a second day until today. Banks will remain shut until Thursday, a government official said.

Moody’s Investors Service said that the move is a significant step toward limiting support for bank creditors across Europe and shows that policy makers will risk financial market disruptions to avoid sovereign defaults.