Brussels, 26/03/2013 (Agence Europe) - At the start of the week, the Cypriot government tried to get the population to accept the new bailout plan as young people demonstrated against the strings attached by the country's future lenders.
In an interview with Bloomberg on Tuesday 26 March, Cypriot Finance Minister Michalis Sarris said: “It was imperative that we reached a solution. Major correction was needed, major reduction in the banking system, including possibly the disappearance of the two major banks, and we were able to save one of the two”. The country's two biggest banks are Bank of Cyprus (BoC) and Popular Bank (Laiki). BoC was saved (see EUROPE 10814).
Bank of Cyprus will have to be bailed out, and, as part of this process, there will be a raid of 30% or more on savings above the €100,000 mark. In return for their cash, savers will be given shares in the bank. BoC President Andreas Artemis is reported to have handed in his resignation on Tuesday, which the bank's board was to consider later the same day.
Banks in Cyprus have been closed for the past ten days to avoid a run on the banks and are not expected to re-open until Thursday 28 March, according to an announcement by the Cypriot central bank. It would appear that BoC will re-open on Thursday too, but there are rumours that it will remain closed for another day so that the tax can be taken from savers' bank accounts on Friday. Subsidiaries of Cypriot banks in Greece will re-open on Thursday, says Greek bank Piraeus, which has acquired them for €524 million.
“We are having deliberations together with bankers and our partners to see what is the right balance between controls that will not cripple the economy, that will allow the economy to function”, explained Sarris. The Cypriot president, Nicos Anastasiades, promised on Monday evening that the capital restrictions would be temporary and gradually phased out.
Nicosia to stay in the euro. “It would be catastrophic to even talk or entertain the idea and much less exit the euro zone”, said Sarris. “Our place is in Europe, our place is in the eurozone, and we will do whatever it takes to stay there”, he stated. Anastasiades explained: “In all these days there were voices heard calling for the exit of Cyprus from the euro. Despite the bitterness and disappointment that we all felt from the stance that some of our partners held towards Cyprus, I don't think that the disengagement from the European family would address the crisis”.
Cyprus is a special case. On Tuesday, the European Commission, the European Central Bank and the Greek finance minister, Yannis Stournaras, said that Cyprus was a special case, and the methods chosen to bail out the country's two biggest banks must not be seen as a model for similar bailouts elsewhere in the eurozone. The European Commission said it was a good solution for Cyprus, but that didn't mean that the same model was to be repeated in the future without any changes. On Monday evening, the head of the Eurogroup, Jeroen Dijsselbloem, changed his mind and corrected his earlier comments that Cyprus provided a good example for elsewhere in the eurozone (see related article). (EL/transl.fl)