[h=1]Cyprus' savers bear brunt of unprecedented bailout[/h] Sat, Mar 16 2013
By Annika Breidthardt and Robin Emmott and Michele Kambas
BRUSSELS/NICOSIA (Reuters)EXCERPT:
- The euro zone agreed on Saturday to hand Cyprus a bailout worth 10 billion euros ($13 billion), but demanded depositors in its banks forfeit some money to stave off bankruptcy despite the risk of a wider run on savings.
The eastern Mediterranean island becomes the fifth country after Greece, Ireland, Portugal and Spain to turn to the euro zone for financial help during the region's debt crisis.
In a radical departure from previous aid packages - and one that gave rise to incredulity and anger across the country - euro zone finance ministers forced Cyprus' savers to pay up to 10 percent of their deposits to raise almost 6 billion euros.
Parliament was due to meet on Sunday to vote on the measure, and approval was far from assured.
The decision prompted a run on cashpoints, most of which were depleted by mid afternoon, and co-operative credit societies closed to prevent angry savers withdrawing deposits.
Almost half Cyprus's bank depositors are believed to be non-resident Russians, but most queuing on Saturday at automatic teller machines appeared to be Cypriots.
President Nicos Anastasiades, elected three weeks ago with a pledge to negotiate a swift bailout, said refusal to agree to terms would have led to the collapse of the two largest banks.
"On Tuesday ... We would either choose the catastrophic scenario of disorderly bankruptcy or the scenario of a painful but controlled management of the crisis," Anastasiades said in written statement.
In several statements since his election, he had previously categorically ruled out a deposit haircut.
"My initial reaction is one of shock," said Nicholas Papadopoulos, head of parliament's financial affairs committee. "This decision is much worse than what we expected and contrary to what the government was assuring us, right up until last night," he told Reuters, without saying whether he would back the measure or whether he thought it would pass.
Papadopoulos is vice-chairman of the Democratic Party, a partner in Cyprus's centre-right ruling coalition and whose support in parliament will be crucial to pass any haircut.
Parliament was expected to convene from 1600 local (1400 GMT) on Sunday to discuss the emergency legislation. Without parliamentary approval, a haircut cannot take place.
'THEFT, PURE AND SIMPLE'
The bailout was smaller than initially expected and is mainly needed to recapitalize Cypriot banks that were hit by a sovereign debt restructuring in Greece.
The deposit levy - set at 9.9 percent on bank deposits exceeding 100,000 euros and 6.7 percent on anything below that - will take place on Tuesday after a bank holiday on Monday.
To guard against capital flight, Cyprus took immediate steps to prevent electronic money transfers over the weekend.
At one cashpoint in the capital Nicosia, a pensioner couple said they had visited several automatic teller machines without success. "We are trying to pull as much as we can," one told Reuters, reaching for a wallet containing four debit cards.
END EXCERPT
Don't think it couldn't happen here...
By Annika Breidthardt and Robin Emmott and Michele Kambas
BRUSSELS/NICOSIA (Reuters)EXCERPT:
- The euro zone agreed on Saturday to hand Cyprus a bailout worth 10 billion euros ($13 billion), but demanded depositors in its banks forfeit some money to stave off bankruptcy despite the risk of a wider run on savings.
The eastern Mediterranean island becomes the fifth country after Greece, Ireland, Portugal and Spain to turn to the euro zone for financial help during the region's debt crisis.
In a radical departure from previous aid packages - and one that gave rise to incredulity and anger across the country - euro zone finance ministers forced Cyprus' savers to pay up to 10 percent of their deposits to raise almost 6 billion euros.
Parliament was due to meet on Sunday to vote on the measure, and approval was far from assured.
The decision prompted a run on cashpoints, most of which were depleted by mid afternoon, and co-operative credit societies closed to prevent angry savers withdrawing deposits.
Almost half Cyprus's bank depositors are believed to be non-resident Russians, but most queuing on Saturday at automatic teller machines appeared to be Cypriots.
President Nicos Anastasiades, elected three weeks ago with a pledge to negotiate a swift bailout, said refusal to agree to terms would have led to the collapse of the two largest banks.
"On Tuesday ... We would either choose the catastrophic scenario of disorderly bankruptcy or the scenario of a painful but controlled management of the crisis," Anastasiades said in written statement.
In several statements since his election, he had previously categorically ruled out a deposit haircut.
"My initial reaction is one of shock," said Nicholas Papadopoulos, head of parliament's financial affairs committee. "This decision is much worse than what we expected and contrary to what the government was assuring us, right up until last night," he told Reuters, without saying whether he would back the measure or whether he thought it would pass.
Papadopoulos is vice-chairman of the Democratic Party, a partner in Cyprus's centre-right ruling coalition and whose support in parliament will be crucial to pass any haircut.
Parliament was expected to convene from 1600 local (1400 GMT) on Sunday to discuss the emergency legislation. Without parliamentary approval, a haircut cannot take place.
'THEFT, PURE AND SIMPLE'
The bailout was smaller than initially expected and is mainly needed to recapitalize Cypriot banks that were hit by a sovereign debt restructuring in Greece.
The deposit levy - set at 9.9 percent on bank deposits exceeding 100,000 euros and 6.7 percent on anything below that - will take place on Tuesday after a bank holiday on Monday.
To guard against capital flight, Cyprus took immediate steps to prevent electronic money transfers over the weekend.
At one cashpoint in the capital Nicosia, a pensioner couple said they had visited several automatic teller machines without success. "We are trying to pull as much as we can," one told Reuters, reaching for a wallet containing four debit cards.
END EXCERPT
Don't think it couldn't happen here...
