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Last minute rescue: painful Cyprus deal, bankruptcy averted, depositors cry

Hours of tough negotiations between Cyprus and international lenders ended in a deal at 2 a.m. on Monday morning. President Nicos Anastasiades and the head of European Union, European central Bank and International Monetary Fund agreed to a hefty haircut for deposits above 100,000 euro at Bank of Cyprus and Cyprus Popular Bank, the shut down of CPB and the shifting CPB deposits below 100,000 euros to the BOC to create a “good bank.”  Deposits below 100,000 euro will not undergo a haircut and will be secured according to EU deposits insurance laws. The CPB debt of 9 billion euro to ELA (Emergency Liquidity Assistance) will be transferred to BOC but it will remain ‘frozen’.

The exact percentage of the deposits ‘haircut’ – also called “levy” – have not been determined. It’s estimated to be between 28-30 percent. Allegedly the Troika had asked 40-50-60% haircut that was vehemently rejected by Anastasiades.

lagarde schaeuble cyprus

Brussels nights – Lagarde- Schaeuble: Cyprus rescue? AAAAAAHAHAHAHAHAH!

The raid on uninsured Popular bank depositors “is expected to raise 4.2 billion euros,” Eurogroup chairman Jeroen Dijssebloem said. Depositors at Bank of Cyprus are estimated to lose 1,6 billion euro. With this, the Troika demand for a bail-in of 5.8 billion euro will be met.

European Last Supper: Belgian Pizza (via The Guardian/AP) #Eurogroup #Cyprus  http://twitter.yfrog.com/odvtzgoj

Negotiators order 20 pizzas for dinner. Not clear if Cyprus got extra pepperoni

Cypriot interior minister told media, that the banks will open on Tuesday. It’s not clear yet whether the cap of 100-120 euro for ATM withdrawals will be lifted or modified. Cypriot media report that deposits will remain ‘frozen’ until further notice.

The 10 billion euro rescue funds will not be used for banks recapitalization.

The decision for the Cypriot banks restructure will not need approval by the Parliament.

German Finance Minister Wolfgang Schaeuble said Cypriot lawmakers would not need to vote on the new scheme, since they had already enacted a law setting procedures for bank resolution. “It can’t be done without a bail-in in both banks … This is bitter for Cyprus, but we now have the result that the (German) government always stood up for,” Schaeuble told reporters, saying he was sure the German parliament would approve. (Reuters)

International media focus on the losses that wealthy Russians and Britons will suffer.

Hardly anyone mentions the loss of jobs. Or the losses for depositors of let’s say 120,000-150,000 euro. Or the losses for Cypriot insurance funds, hospitals, state companies, universities…

Cyprus joined the eurozone in 2008. It was eaten up within one week.

cyprus on the table

Official Eurogroup statement here

PS Bank collapse averted, Cyprus was saved, a bad example has been created. But the German position won 🙂

 

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