Cyprus and EU agree draft proposal to rescue banks

BRUSSELS Sun Mar 24, 2013 11:59pm GMT

1 of 9. International Monetary Fund (IMF) managing director Christine Lagarde (L) and Germany's Finance Minister Wolfgang Schauble chat at the start of a Eurogroup meeting at the European Council building in Brussels, March 24, 2013.

Credit: Reuters/Sebastien Pirlet

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BRUSSELS (Reuters) - Cyprus, the European Union and the International Monetary Fund have agreed a new plan to resolve the island's bank and finance a rescue of the country, an EU official said early on Monday.

The proposal, which will now be presented to euro zone finance ministers for discussion, will involve setting up a "good bank" and a "bad bank" and will mean that Popular Bank of Cyprus, known as Laiki, will effectively be shut down.

Deposits below 100,000 euros (85, 232 pounds) in Laiki will be transferred to Bank of Cyprus. Deposits above 100,000 euros, which under EU law are not insured, will be frozen and will be used to resolve debt. It remains unclear how large the write-down on those funds will be.

The EU spokesman said there would be no "levy" imposed on any Cypriot banks, with the package requiring a full "bail-in" of uninsured depositors, which is likely to mean heavy losses for those with large holdings in Laiki and potentially Bank of Cyprus, where many Russians hold bank accounts.

(Reporting by Annika Breidthardt and Jan Strupczewski; Writing by Luke Baker)

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Comments (7)
Phil999 wrote:
It must be the case that the Troika would prefer Cyprus to be in the eurozone and the hasty arrangement meeting must indicate that. However, Cyprus is a very small country and is undoubtedly able to be bullied because of its size. The Troika must surely deal with the meetings today with some sympathy and with careful hands. Cyprus has been kicked around for being a naughty boy but making it an example of this tiny country is a dangerous way forward for the eurozone. Just get the job done properly – please.

Mar 24, 2013 6:37am GMT  --  Report as abuse
Phil999 wrote:
It must be the case that the Troika would prefer Cyprus to be in the eurozone and the hasty arrangement meeting must indicate that. However, Cyprus is a very small country and is undoubtedly able to be bullied because of its size. The Troika must surely deal with the meetings today with some sympathy and with careful hands. Cyprus has been kicked around for being a naughty boy but making it an example of this tiny country is a dangerous way forward for the eurozone. Just get the job done properly – please.

Mar 24, 2013 6:37am GMT  --  Report as abuse
Robbedoes wrote:
“Just get the job done properly” .. Yes, please.

Problem is that the chances of containing and solving this problem have been torpedoed by the Cypriot PM and MPs (in their almighty wisdom), as well as by “the people” (finally being able to tell the Eurozone to sod off). These days Democracy is, more often than not, reduced to tyranny of the majority .. a majority which isn’t terribly bright.

Mar 24, 2013 12:14pm GMT  --  Report as abuse
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