Wednesday

29th Mar 2023

Savers to share the pain in €10bn Cyprus bailout

  • Cypriot bank savers will lose 10% of their money (Photo: jnocca93)

Depositors will lose up to 10 percent of their savings as part of a €10 billion bailout for Cyprus agreed on Friday (15 March)

The Mediterranean island will become the fifth eurozone country to receive a rescue package after eurozone ministers reached agreement following all-night talks on Friday (15 March).

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

However, in a departure from all previous rescue packages, people with Cypriot bank accounts will share in the pain.

People with less than €100,000 face a 6.75 percent levy, while those with more will pay 9.9 percent.

The one-off tax is expected to raise €5.8 billion.

Speaking with reporters after nearly 10 hours of talks, Dutch finance minister Jeroen Djisselbloem, who chairs the Eurogroup, commented that "as it is a contribution to the financial stability of Cyprus, it seems just to ask for a contribution of all deposit holders."

He added that the "unique measure" was needed to trim the size of the Cypriot banking sector, describing it as "justified, in terms of burden sharing, to also involve the depositors."

The final bailout figure is significantly below the €17.5 billion previously estimated by Cyprus.

Djisselbloem said that the smaller bailout package would enable Cyprus to reduce its debt pile below 100 percent of GDP by 2020.

The Cypriot bank sector is on the verge of collapse, with assets and liabilities worth nearly €120 billion - almost eight time the size of the island's annual GDP.

The banks also took a €4.5 billion hit as a result of the haircut imposed on private holders of Greek debt in 2012.

Cyprus opened talks on a rescue package last summer, but negotiations stalled after the outgoing Communist President Demetris Christofias refused to sign off a deal.

The bailout talks were also complicated by allegations that Cypriot banks have laundered money for Russian oligarchs.

There is an estimated €20 billion from Russian depositors in Cypriot banks.

Moneyval, an audit body connected to the Strasbourg-based Council of Europe, is expected to produce a report on the issue later this month.

Meanwhile, Russia is expected to play its part by extending the maturity date of a €2.5 billion loan to 2021.

EU economic affairs commissioner Olli Rehn noted that Moscow is "ready to make a contribution with an extension of the loan and a reduction of the interest rate."

Cypriot finance minister, Michalis Sarris, said that he agreed to the package reluctantly.

"I am not happy with this outcome in the sense that I wish I was not the minister that had to do this," he said.

"The system did not leave us with any options," he added.

In a bid to prevent investors trying to take their money out of Cyprus, Sarris revealed that it is no longer possible to make large bank withdrawals.

For her part, International Monetary Fund chief Christine Lagarde also backed the deal. She indicated that the IMF is likely to make a contribution, but she said "the exact amount is not yet specified."

Cyprus heading for bank run after bailout deal

The Cyprus bailout deal on losses for all bank savers - from pensioners to Russian oligarchs - is turning into a bank run, with dangerous implications for other crisis-hit countries.

Opinion

Dear EU, the science is clear: burning wood for energy is bad

The EU and the bioenergy industry claim trees cut for energy will regrow, eventually removing extra CO2 from the atmosphere. But regrowth is not certain, and takes time, decades or longer. In the meantime, burning wood makes climate change worse.

Opinion

EU's new critical raw materials act could be a recipe for conflict

Solar panels, wind-turbines, electric vehicle batteries and other green technologies require minerals including aluminium, cobalt and lithium — which are mined in some of the most conflict-riven nations on earth, such as the Democratic Republic of Congo, Guinea, and Kazakhstan.

Latest News

  1. EU approves 2035 phaseout of polluting cars and vans
  2. New measures to shield the EU against money laundering
  3. What does China really want? Perhaps we could try asking
  4. Dear EU, the science is clear: burning wood for energy is bad
  5. Biden's 'democracy summit' poses questions for EU identity
  6. Finnish elections and Hungary's Nato vote in focus This WEEK
  7. EU's new critical raw materials act could be a recipe for conflict
  8. Okay, alright, AI might be useful after all

Stakeholders' Highlights

  1. EFBWWEFBWW and FIEC do not agree to any exemptions to mandatory prior notifications in construction
  2. Nordic Council of MinistersNordic and Baltic ways to prevent gender-based violence
  3. Nordic Council of MinistersCSW67: Economic gender equality now! Nordic ways to close the pension gap
  4. Nordic Council of MinistersCSW67: Pushing back the push-back - Nordic solutions to online gender-based violence
  5. Nordic Council of MinistersCSW67: The Nordics are ready to push for gender equality
  6. Promote UkraineInvitation to the National Demonstration in solidarity with Ukraine on 25.02.2023

Join EUobserver

Support quality EU news

Join us