Cyprus bailout agreement reached

by | Mar 25, 2013 | News

Courtesy of Flickr

Courtesy of Flickr

By Giulia Frisina

There is some relief in Cyprus today after the country reached a bailout agreement saving it from a banking system collapse and a possible exit from the Eurozone.

BBC said the agreement emerged early this morning in Brussels after more then 10 hours of negotiations. It was the second time in nine days that the Cypriot President, Nicos Anastasiades met with the European Central Bank and International Monetary Fund leaders. The first accord was reached on March 16 but fell apart when parliament rejected a tax on all bank accounts of small depositors.

CTV news reported that Cyprus will get €billion ($13-billion US) in rescue loans, but in order to qualify, the country must raise €5.8 billion. The country agreed to drastically shrink its outsized banking sector, cut its budget, implement economic reforms and privatize state assets.

Reuters said Cypriot banks hold €68-billion in deposits, of which €38-billion are in accounts of more than €100,000. While some of the deposits are held in Russian banks in Cyprus, Russians who use Cyprus to park their cash could face billions in losses. Even worse, they may not be able to get any of their funds out of the country, thanks to capital controls.
On Sunday, Bank of Cyprus further limited cash machine withdrawals to 120 euros a day. With queues growing outside cash machines across the island, Laiki also lowered its daily limit to 100 euros, a Cyprus News Agency reported. The bank’s previous limit had been 260 euros per day.