Savers in Bank of Cyprus to lose 60pc of savings over €100k
Published 30/03/2013 | 15:07
MAJOR depositors in Cyprus's biggest bank will lose around 60 percent of savings over €100,000, its central bank confirmed today.
The news sharpened the terms of a bailout that has shaken European banks and saved the island from bankruptcy.
Initial signs that big depositors in Bank of Cyprus would take a hit of 30 to 40 percent - the first time the euro zone has made bank customers contribute to a bailout - had already unnerved investors in European lenders this week.
But the official decree published on Saturday confirmed a Reuters report a day earlier that the bank would give depositors shares worth just 37.5 percent of savings over €100,000. The rest of such holdings might never be paid back.
The toughening of the terms will send a clear signal that the bailout means the end of Cyprus as a hub for offshore finance and could accelerate economic decline on the island and bring steeper job losses.
Banks reopened to relative calm on Thursday after an almost two-week shutdown and the imposition of capital controls. The streets of Nicosia were calm today, filled with crowds relaxing in its cafes and bars.
There is no sign for now that ordinary customers in other struggling euro zone countries like Greece, Italy or Spain are taking fright at the precedent set by the bailout.
"Cyprus is and will remain a special one-off case," German Finance Minister Wolfgang Schaeuble, one of the architects of the euro zone's response to a debt crisis now in its fourth year, told German mass-selling daily Bild.
"The savings accounts in Europe are safe."
European officials have worked hard this week to stress that the island's bailout was a unique case - after a suggestion by Eurogroup chairman Jeroen Dijsselbloem that the rescue would serve as a model for future crises rattled European financial markets.
"Together in the Eurogroup we decided to have the owners and creditors take part in the costs of the rescue - in other words those who helped cause the crisis," said Schaeuble.
"Cyprus's economy will now go through a long and painful period of adjustment. But then it will pay back the loan when it is on a solid economic foundation."
Cypriot President Nicos Anastasiades said on Friday that the €10 bn euro ($13 billion) bailout had contained the risk of national bankruptcy and would prevent it from leaving the euro.
Cypriots, however, are angry at the price attached to the rescue - the winding down of the island's second-largest bank, Cyprus Popular Bank, also known as Laiki, and an unprecedented raid on deposits over €100,000.
Etyk, a bank worker's union, called a rally outside parliament for Thursday to protest against potential job cuts and a hit on their pension funds.