Last-minute deal keeps Cyprus finance crisis at bay

Posted on 25 Mar 2013

Finance ministers from the eurozone agreed on a last-minute €10bn bailout for Cyprus that will prevent the country’s banking system from sinking.

The agreement was reached after several hours of intense negotiation between the Cypriot president Nicos Anastasiades and representatives of the European Union, European Central Bank and the International Monetary Fund (the so-called “troika”).

Deposits in the contry’s two largest banks – Laiki and Bank of Cyprus – will be “fully guaranteed” if under €100,000, while holders of larger deposits will face considerable losses.

The tax levy for large deposits will be decided in the coming weeks, and will not require a vote by the Cypriot parliament.

Many on the island fear that the measure will manage Cyprus’s financial sector by keeping foreign investors away, especially the Russians.

Jeroen Dijsselbloem, president of the Eurogroup, said the deal “puts an end to the uncertainty” of Cyprus’s economy, which left financial markets around the world in turmoil for the last two weeks.

However, the Mediterranean country’s near future will be difficult, according to the EU commissioner for economic affairs Olli Rehn. On Sunday cash machine withdrawals from the Bank of Cyprus were limited to €120 a day.


Photo courtesy of NiccolA Caranti