STEVIS in Brussels and ALKMAN GRANITSAS in Athens
Cyprus and the International Monetary Fund
reached an agreement for a €1 billion ($1.28 billion) lifeline on top of the €9
billion bailout the island will get from its euro-zone peers, the IMF said in a
on bank creditors could prove costly for northern European taxpayers
2013 |From the print edition
deal to bail out Cyprus
was much better than the first. For one thing, there was actually a deal: with
the €10 billion ($13 billion) loan the prospect of the euro zone’s first exit
has receded. An agreement among euro-zone finance ministers to wind up Laiki
second-biggest bank, and restructure Bank of Cyprus, the largest lender on the
island, undid the worst elements of the initial botched agreement. Savers with
accounts below the €100,000 deposit-guarantee threshold will be spared. Losses
will hit creditors of weak banks in line with the normal hierarchy:
shareholders and junior bondholders first, followed by senior bondholders and
Cyprus will pay dearly for its sins. The
Mediterranean island has committed many follies over the years — and is still
Cypriots always seem to overestimate their negotiating position. In recent
years, their first big mistake was to reject in 2004 the U.N. plan for uniting
their island. That irritated their E.U. partners, put Cyprus in a weak strategic position vis-à-vis Turkey and left
a jagged scar across the island.
the criticism of bailouts since the financial crisis struck, virtually no one
has suggested that depositors in banks be made to suffer along with their
investors, employees and customers. Until this week, when the euro zone
proposed that, in return for a bailout of the failing banking system in Cyprus,
depositors pay a “tax” of 6.75 percent of their deposits — 9.9 percent for
deposits above 100,000 euros.
Cypriot President Nicos Anastasiades was expected in Brussels
on Sunday to seek an 11th-hour reprieve from financial meltdown, with a bailout
from the European Union and the island's place in Europe's
single currency bloc hanging in the balance.
the gravity of Cyprus'
position, the EU's economic affairs chief said there were now "only hard
choices left" for the latest casualty of the euro zone crisis.
conceded on Saturday to a one-off levy on deposits over 100,000 euros in a
dramatic U-turn as it raced to satisfy European partners and seal an 11th-hour
bailout deal to avert financial collapse.