Cyprus : Deal reached in Eurogroup talks.

IMF chief Christine Lagarde: “We believe that this will form a durable and fully financed solution”

Eurozone finance ministers have agreed a 10bn-euro bailout deal for Cyprus to prevent its banking system collapsing and keep the country in the eurozone.

Laiki (Popular) Bank – the country’s second-biggest – will be wound down and deposit-holders with more than 100,000 euros ($130,000; £85,000) will face big losses.

However, all deposits under 100,000 euros will be “fully guaranteed”.

Officials warn the island faces a deep recession with many businesses to shut.

The European Central Bank had set a deadline of Monday for the deal, which came a week after the Cypriot parliament rejected a proposed bank levy on small and large deposits.

The new deal will not be put to a vote in the Cyprus parliament.

IMF head Christine Lagarde said the bailout deal agreed was “a comprehensive and credible plan” to help restore trust in the banking system.

Cypriot Finance Minister Michalis Sarris said he believed the possibility of bankruptcy had been averted.

“It’s not that we won a battle, but we really have avoided a disastrous exit from the eurozone,” he said.

There will be relief in Cyprus that small depositors have been protected, but the deal comes at a heavy price, BBC correspondents say.

The chairman of the Cypriot parliament’s finance committee, Nicholas Papadopolous, said the agreement made “no economic sense”

Sources :
bbc.co.uk
reuters.com