EU finance ministers seek to cut tax evasion

BRUSSELS (AP) — European Union finance ministers will later seek ways to cut down on tax evasion — action British Chancellor George Osborne says is particularly important in current circumstances.

On his way into a meeting of the 27 ministers in Brussels Tuesday, Osborne says it is "right that everyone makes their fair contribution" given the current economic backdrop.

Part of the effort will involve a long-stuck savings directive, which seeks an automatic exchange of information between different countries so that interest income on various types of savings accounts can be properly taxed

The ministers will also continue their effort to construct a banking union. And they will try to reach a budget agreement for the current year.

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Egypt appoints 9 ministers in limited reshuffle

CAIRO (AP) — Egypt's state-run news agency says Prime Minister Hesham Kandil named nine new ministers in the second cabinet reshuffle since Islamist President Mohammed Morsi assumed his post in August last year.

MENA reported the shuffle on Tuesday. New ministers include the finance, oil and investment portfolios. At least two are from Morsi's Muslim Brotherhood group, and others are also believed to be allies.

A presidential spokesman said last month that the government would consult with the opposition while planning the shuffle. But Egypt's main opposition bloc denied it received any calls from the presidency. The reshuffle falls short of opposition's demands to oust Kandil, whom they say failed to deliver key reforms.

Opposition leader Amr Moussa commented on the reshuffle by repeating demands for a national unity government.

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G8 foreign ministers meet in London to address Syria, North Korea

By Natalie Huet

LONDON (Reuters) - G8 foreign ministers meet on Wednesday in London, where host Britain will press its case for doing more to help the Syrian opposition against President Bashar al-Assad and end a devastating civil war.

Responding to threats from North Korea of an imminent conflict with its southern neighbor will also be high on the agenda of the Group of Eight leading industrialized nations - the United States, Britain, France, Germany, Italy, Japan, Canada and Russia - gathered in Britain's capital till Thursday.

Leaders of the Syrian National Coalition will be present on the sidelines of the G8 and hold talks with those foreign ministers willing to meet them, British Foreign Secretary William Hague told reporters on Tuesday.

Hague, his French counterpart Laurent Fabius and U.S. Secretary of State John Kerry are expected to hold talks with the civilian opposition figures.

"I will be joining and convening some of those meetings to discuss the urgent humanitarian needs and the urgent need for a political and diplomatic breakthrough on Syria," Hague said.

France and Britain are expected once again to press the case for amending or lifting an arms embargo on Syria to support the outgunned rebels waging a two-year-old uprising against Assad and help end a civil war that has already claimed an estimated 70,000 lives and displaced millions of people.

"This is turning into the greatest humanitarian catastrophe of the 21st century so far, and we cannot watch this happen," Hague said, adding that humanitarian aid, while indispensable, would not alone solve the Syrian crisis.

"We certainly believe that it's necessary to continue, if the situation continues to deteriorate, to increase the practical help we give to the Syrian opposition," Hague said.

ARMS TALKS

Paris and London say they want to raise pressure on Assad and try to force him to the negotiating table by allowing the supply of arms to the rebels.

But other G8 countries such as Russia and Germany have opposed the move, fearing it could lead to weapons falling into the hands of Islamist militants and fuel a regional conflict.

Changing the EU arms ban on Syria, which must be renewed or amended by June 1, needs backing from all 27 EU states. Britain and France have said they could act alone if they do not get their way.

Hague said Britain had made no decision yet to supply lethal weapons to the Syrian opposition, but that he would discuss the matter with his French counterpart Fabius on Wednesday.

"We think that as things stand today there is going to be a very strong case for further amendments to the embargo or the lifting of the embargo," he said.

G8 foreign ministers will also discuss how to respond to North Korea, which has waved threats of imminent conflict against the United States and South Korea and on Tuesday warned foreigners to evacuate the South to avoid being caught in a war.

Russia said on Tuesday the G8 was in agreement in rejecting North Korea's recent provocative behavior and urged all sides to pursue diplomacy to calm the increasingly tense situation in northeast Asia.

Hague said that, just like Iran, nuclear-ambitious North Korea had the choice between engaging in "realistic" international talks or facing increased international sanctions.

"If they continue on this path ... they will end up with a broken country that is isolated," Hague said, noting that even longtime ally China was disapproving of North Korea's actions.

Other than top international issues, Hague said foreign ministers planned to discuss Burma, Somalia, cyber-security and the issue of preventing sexual violence in warzones.

(Additional reporting by John Irish in Paris; Editing by Jon Hemming)

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EU finance ministers approve Cyprus bailout deal

BRUSSELS (AP) — Cyprus avoided bankruptcy, and potential turmoil across the eurozone, by securing a last-minute 10 billion euro ($13 billion) bailout with promises to sharply cut back its oversized banking sector and make large bank account holders take losses to help pay much of the bill.

Negotiations into early Monday ended with approval of the deal by the 17-nation eurozone's finance ministers. The European Central Bank had threatened to cut off crucial emergency assistance to the country's banks by Tuesday if no agreement was reached.

Without a bailout deal by Monday night, the tiny Mediterranean nation would have faced the prospect of bankruptcy, which could have forced it to become the first country to abandon the euro currency. That would have sent the region's markets spinning.

"It's not that we won a battle, but we really have avoided a disastrous exit from the eurozone," said Cyprus' Finance Minister Michalis Sarris.

The eurozone finance ministers accepted the plan after hours of negotiations in Brussels between Cypriot officials and the so-called troika of creditors — the International Monetary Fund, the European Commission and the ECB.

"We believe that this will form a lasting, durable and fully financed solution," said IMF chief Christine Lagarde.

To secure the rescue loan package, the Cypriot government had to find ways to raise 5.8 billion euros ($7.5 billion) on its own. The bulk of that money is now being raised by forcing losses on large bank deposit holders, with the remainder coming from tax increases and privatizations.

Cyprus must drastically shrink its banking sector, cut its budget, implement structural reforms and privatize state assets, said Jeroen Dijsselbloem, who chairs the meetings of the eurozone's finance ministers. The country's second-largest bank, Laiki, will be restructured, with all bond holders and people with more than 100,000 euros in their bank accounts there facing significant losses.

The measures are likely to deepen the recession in Cyprus.

The cash-strapped island nation has been shut out of international markets for almost two years. It first applied for a bailout to recapitalize its ailing lenders and keep the government afloat last June, but the political negotiations stalled. After a botched agreement last week, the European Central Bank threatened to cut off emergency assistance to the country's banks.

"We've put an end to the uncertainty that has affected Cyprus and the euro area over the past week," Dijsselbloem said.

That uncertainty around the tiny nation of about 800,000 had shaken the entire eurozone of 300 million people, even though Cyprus only makes up less than 0.2 percent of the eurozone's economy.

Several national parliaments in eurozone countries such as Germany must also approve the bailout deal, which might take another few weeks. EU officials said they expect the whole program to be approved by mid-April.

The country's second-largest bank, Laiki, will be dissolved immediately into a bad bank containing its uninsured deposits and toxic assets, with the guaranteed deposits being transferred to the nation's biggest lender, Bank of Cyprus.

Dijsselbloem said it was not yet clear how severe the losses would be to Laiki's large bank deposit holders, but he noted that it is expected to yield 4.2 billion euros overall — or much of the money that Cyprus needed to raise to secure the bailout. Analysts have estimated investors might lose up to 40 percent of their money.

Large deposits with Bank of Cyprus above the insured level will be frozen until it becomes clear whether or to what extent they will also be forced to take losses, the Eurogroup of finance ministers said in a statement.

Dijsselbloem defended the creditors' approach of making deposit holders take heavy losses, saying the measures "will be concentrated where the problems are, in the large banks."

The international creditors, led by the IMF, were seeking a fundamental restructuring of the country's outsized financial system, which is worth up to eight times the Cypriot gross domestic product of about 18 billion euros. They said the country's business model of attracting foreign investors, among them many Russians, with low taxes and lax financial regulation had backfired and needed to be upended.

The drastic shrinking of the financial sector, the wiping out of wealth through the losses on deposits, the loss of confidence with the recent turmoil and the upcoming austerity measures all mean that Cyprus is facing tough times.

"The near future will be very difficult for the country and its people," acknowledged the EU Commission's top economic official, Olli Rehn. "But (the measures) will be necessary for the Cypriot people to rebuild their economy on a new basis."

Cypriot banks have been closed this past week while officials worked on a rescue plan, and they are not due to reopen until Tuesday. Cash has been available through ATMs, but long lines formed and many machines have quickly run out of cash.

Amid fears of a banking collapse, Cyprus' central bank on Sunday imposed a daily withdrawal limit of 100 euros ($130) from ATMs of the country's two largest banks to prevent a bank run by depositors worried about their savings.

The Cypriot government also approved a set of laws over the past week to introduce capital controls, in order to avoid a huge depositor flight once banks reopen.

Creditors had insisted that Cyprus couldn't receive more loans because that would make its debt burden unsustainably high. The IMF's Lagarde said Cyprus would now reach a debt level of about 100 percent of GDP by 2020.

A plan agreed to in marathon negotiations earlier this month called for a one-time levy on all bank depositors in Cypriot banks. But the proposal ignited fierce anger because it also targeted small savers. It failed to win a single vote in the Cypriot Parliament.

Cyprus' bid to secure more financial aid from its long-time ally, Russia, then failed, forcing it to turn again to its European partners. Russia was expected, however, to extend a 2.5 billion euro emergency loan granted last year, also lowering the interest rate due and extending then repayment schedule.

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Associated Press writers Elena Becatoros and Menelaos Hadjicostis in Nicosia, Cyprus, contributed to this story.

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Juergen Baetz can be reached at http://www.twitter.com/jbaetz

Don Melvin can be reached at https://twitter.com/Don_Melvin

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