Cyprus gets deal, haircut
March 25, 2013
The deal received final backing at about 2 a.m. in Brussels (0100 GMT), 12 hours into marathon talks between Cypriot president Nicos Anastasiades and the European Union, the European Central Bank (ECB) and the International Monetary Fund. Anastasiades said he was "content" with the deal.
"Efforts have culminated," he posted on Twitter.
After Sunday's meeting, Anastasiades said he felt the negotiations had left him no options to help his country. However, that appeared to have changed by early Monday morning.
Deposit levy
Negotiations aimed to pull together several billion euros, mainly from the banking sector, to unlock a 10-billion-euro ($13 billion ) package agreed to last week. EU sources announced that eurozone finance ministers had given the deal their approval. The agreement involves breaking up Laiki, the country's second largest lender.
The Bank of Cyprus, the country's No.1 lender, will take losses on investment value for deposits over 100,000 euros. The bank, with one-third of all holdings, survives, but at a massive price for investors - and the bank holds most of the island's offshore Russian deposits.
The agreement backs off last week's deal to hit all savers. EU deposit-guarantee legislation will cover smaller account holders; but those above 100,000 euros face big losses.
Breathing room
On Friday, the parliament in Nicosia had passed a number of measures aimed at meeting the troika's demands. However, they had voted down the bank account levy.
In Cyprus, banks had limited ATM withdrawals to 120 euros per day over the weekend in anticipation of a run on accounts. Cypriots have been restricted to withdrawing less cash every few days since the bank shutdown began 10 days ago, when account holders panicked in reaction to the threat of the "deposit tax."
Anastasiades met first with ECB head Mario Draghi, IMF managing director Christine Lagarde, EU president Herman Van Rompuy, European Commission head Jose Manuel Barroso, Eurogroup chair Jeroen Dijsselbloem and the economic affairs commissioner Olli Rehn. Sources at the presidential palace in Nicosia told state media that at one point the Cypriot leader's frustration boiled over during the talks.
"Do you want to force me to resign?" the Cyprus News Agency quoted Anastasiades as saying.
The crunch talks were called after the ECB threatened to halt life-support funding for Cyprus on Monday if there was no deal. Banks are scheduled to reopen on Tuesday after a 10-day shutdown.
mkg/jr (Reuters, AFP, dpa, AP)