Monthly Archives: March 2013

Even if the free movement of people from the European Union within the Schengen area is now largely achieved, there are a few exceptions. Under certain circumstances, internal border checks are introduced again for a temporary period of time. For example, the moments when such check borders were used are during the Football World Cup and the European Championships, as well as during the NATO summits and the meetings of the Group of Eight. In the summer of 2012, Germany, France and several other countries used border checks when a member country of the European Union allowed refugees that were too many. Such measures however, could be used in case there is serious threat to the public safety. For example, Germany and France were afraid that Greece was no longer able to patrol its border with Turkey in an efficient way due to its inner problems and crisis. In general, the countries that are part of the Schengen zone are trying to be as careful as possible, since when a person is already inside the Schengen are, there are no more borders or other checks applied.

Currently, Bulgaria is still outside of the Schengen zone, but will eventually become one in the future. The country is trying to answer all requirements that are applied, to fight corruption on all levels and to be strict with the crime fight. The country now has a new, interim government and new elections coming in May.

The ruling party in Cyprus lacked just one vote in the parliament to push on the bailout conditions it agreed upon on Saturday. The main dispute is about the one-off tax measure on deposits in the country, that are expected to gather some 5.8 billion Euro in order to stabilize the banks. The initial reports were for two rates – 9.9% for deposits over 100 000 Euros, and 6.7% for those below this sum. Now Cypriots try to renegotiate these terms in favor of the smaller depositors. The unofficial consensus is for 12.5% on the deposits above 100 000 Euros and 3 % on those below that sum. Several authoritative business newspapers predict even a higher rate of 15% for the deposits over 500 000 Euro. According to the governor of the Cyprus Central Bank people with relatively small amounts in all banks should be exempted from tax.

Today will be organized a teleconference between the finance ministers and central bankers of the European Union area, during which shall be discussed whether the new ideas are acceptable. The European Central Bank announced that Cyprus has to decide how and by whom it will collect the sum of 5.8 billion Euro. The finance ministers and the creditors in the face of the European Commission, the European Union and the International Monetary Fund are ready to confirm their promise of 10 billion Euros, but first they want to hear the exact figures and arguments that the measure will be efficient. The financial services in Cyprus make 70% of the gross domestic product. Currently, there is no such statistics for Bulgaria.

The parliament of Cyprus is to hold an important emergency session this afternoon in order to discuss a bailout scenario. The plan is expected to save the country from bankruptcy but the deal is not to the liking of the people. The bailout deal is expected to come into force on Tuesday, 19th March, when Cyprus will get a financial packaged of 10 billion Euro as agreed with the European Union and the International Monetary Fund. The debt is expected to be 100 % covered by year 2020.

The parliament aims introduce a one-time levy on the deposits over 200 000 Euros in the Cypriot banks with 9.9 % and all the rest deposits with 6.75 %, thus aiming to collect around 5.8 billion Euros. The plan aims to compensate the owners of deposits by offering them shares in the bank. There will also be taxation on the interest rates, that generate income form the deposits. The bailout plan for Cyprus further includes an increase from 2.5 % to 12.5 % in the nominal corporate tax, aiming to collect additional 200 million Euros a year.

There are expectations that the International Monetary Fund will probably help Cyprus, but the amount is not specified yet. Russia is expected to help with the extension of five years of the loan and a reduction of the interest on it from the current 4.5%. At the same time, Nicosia may be forced to privatize its telecommunications company, ports and energy company. Until 2018, the banking sector in Cyprus should match the average size of the banking sector in the other EU countries. Currently Cypriot financial sector is eight times larger than the national economy, compared to the European Union where it is about 3.5 times. At the same time the situation in Bulgaria remains stable, with the new interim government already in charge and operating.

Located in Luxembourg, the small village of Schengen played an important role back in year 1985. Then was signed the first agreement among several countries of the European Union that aimed to remove the border controls between these countries and to get common borders. The agreement was named after the village and the free travel zone became popular as Schengen zone. Ten years later, in 1995, the countries that applied these rules were eight. Throughout the years, their number increased to twenty-two states, members of the European Union but also non-members such as Liechtenstein and Switzerland, Iceland and Norway. Other countries, such as Ireland and Great Britain, do have border controls but are still sharing information with the countries from the Schengen zone. Bulgaria, along with Romania and Cyprus are waiting to be accepted. In order for Bulgaria to be accepted in the Schengen border free travel zone, it still needs to cover certain requirements and standards.

The Sofia based politicians are making their best to answer the requirements and to make sure that Bulgaria secures its borders with the neighboring countries that are not members of the European Union, in order to prevent crime and to stop the entry of illegal immigrants. Bulgaria has already gone through a certain transition period of several years, but in the beginning of March, its entry in the Schengen zone was postponed.

Schengen zone could be entered from many parts of Asia and Africa through a special visa. This is also valid for countries like Turkey and Russia. People from Australia and Japan, North and South America can enter the zone without a visa. At the same time, the Western Balkan countries except Kosovo, do not need visas for the Schengen area.