EU and IMF agreed a bailout plan for financial institutions in crisis the island state. Bankruptcy seems off the table, but many of the big investors will have to swallow huge losses. It was not just a long night of negotiations, but the days of nerve-wrecking round.
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| International Monetary Fund Head Office |
However, in the end, it seemed that everyone was at least a little content - even Cypriot Finance Minister Michalis Sarris. "We have achieved the best possible outcome under the circumstances.'s Not that we have won a battle, but really we have avoided a disastrous exit from the euro zone," he said.
If the long night of marathon negotiations have brought a breakthrough, both in Cyprus and the banks would have been threatened with imminent bankruptcy.
The European Central Bank said earlier that its emergency assistance to Cypriot banks to ensure liquidity may only be granted until Monday (03/25/2013). EU Deposit Guarantee is The plan includes a thorough cleaning heavily indebted financial sector of the country, as it is expected to rake in several billion euros in contributions by Cyprus to the rescue package.
With Nicosia thus doing their part, the EU will give 10 million euros in new loans to the small island state. Second largest financial institution in Cyprus, Laiki Bank, must be broken. The toxic assets are transferred to a bad bank called. The rest is to be transferred to the country's largest bank, the Bank of Cyprus - which itself is in financial trouble.
All deposits of more than 100,000 euros will be frozen temporarily. The owners will have to contribute to the bailout, although the size of this contribution remains to be negotiated. They may have to give up as much as 40 percent of their savings. What was important for the euro area was that savings of less than 100,000 euros would not be affected in order to demonstrate that the EU maintains its deposit guarantee for smaller account holders.
Initial plans on how to rescue Cyprus had planned for all account holders to take some of the load - a plan that has caused outrage in Cyprus and concerns about the reliability of the block deposit guarantee in the rest of Europe.
Reduce the size of the financial sector German Finance Minister, Wolfgang Schäuble, was pleased that now we have all the time what had been our position: "This means that the financial burden in part be borne by investors and holders accounts and that would reduce the country's financial sector to a healthy size. advance Before Sunday night, Cyprus had wanted to avoid forcing investors to contribute at all like Nicosia was worried that tarnish the country's attractiveness as a international financial center.
Ultimately, however, the new agreement is not so different from what had been agreed between Cyprus and the Euro over a week ago. Eurogroup chief Jeroen Dijsselbloem even admitted that the instruments chosen now could have been in place a week ago, but added that the current political agreement would not have been possible at that time. "Now we have the best solution I feel worse off say he admitted. Better in the sense that now goes directly to the banks involved.
A difficult future, but a lot of confidence that has been lost in the meantime. EU Economic Affairs Commissioner Olli Rehn himself had barely been optimistic before the talks, saying that good opportunities had passed and now there were only left crack. "The near future will be very difficult for the country and its people," said Rehn. German Chancellor Angela Merkel, has borne the brunt of the blame for the impending bankruptcy and has been the target of vitriolic attacks Cypriot demonstrators angry.
French Finance Minister Pierre Moscovici Cypriot banking sector compared to a game room and his German counterpart Schäuble said it was well known that he would not be "blackmailed" into anything. Before the talks would have been an animal sense eurzone partners are increasingly seen leaving Cyprus fail and default. At least for now, this threat is off the table.
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