The Eurogroup has approved a deal on a 10 billion-euro bailout for Cyprus, struck early Monday in Brussels. Cyprus avoids exiting the eurozone, but will have its second largest bank closed with heavy losses expected for big depositors.
“The size of financial assistance will amount to 10 billion euro,” Eurogroup president Jeroen Dijsselbloem has announced at a press conference in Brussels after the eurozone finance ministers swiftly endorsed the plan.
“With this agreement we’ve put an end to the uncertainty that has affected Cyprus and the euro area over the last few days,” he added.
The new deal agreed between Cyprus and the Troika of international lenders - the EU, the ECB and the IMF - will set up a "good bank" and a "bad bank" and will mean that the country’s second largest bank Laiki will effectively be shut down.
Deposits below 100,000 euros will be shifted from Laiki to the Bank of Cyprus to create a “good bank.” Deposits larger than 100,000 euros, which are not guaranteed under EU law, will be frozen and used to resolve debts. According to Dijsselbloem, the raid on uninsured Laiki depositors is expected to raise 4.2 billion euros.
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