Monday, 25 March 2013

Cyprus gets bailout deal

An agreement has been reached on Cyprus. Reuters reports:

Cyprus clinched a last-ditch deal with international lenders on Monday for a 10 billion euro ($13 billion) bailout that will shut down its second largest bank and inflict heavy losses on uninsured depositors, including wealthy Russians...

The plan, swiftly endorsed by euro zone finance ministers, will spare the east Mediterranean island a financial meltdown by winding down Popular Bank of Cyprus, also known as Laiki, and shifting deposits below 100,000 euros to the Bank of Cyprus to create a "good bank".

Deposits above 100,000 euros, which under EU law are not guaranteed, will be frozen and used to resolve debts, and Laiki will effectively be shuttered, with thousands of job losses.

Initial market reactions to the news were positive. Asian stocks rose and the euro gained against other currencies.

However, losses last week on concerns over Cyprus had not been very large, so any gains today and subsequent days are also likely to be mild.

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