Deal will reportedly involve heavy losses for wealthy investors, while those with savings under €100,000 will be spared
European leaders reached an agreement with Cyprus early on Monday morning to close down the island’s second biggest bank and inflict huge losses on wealthy savers.
Russians would lose billions of euros under draconian terms which are aimed at preventing the Mediterranean tax haven becoming the first country forced out of the single currency.
“Herman Van Rompuy has brokered an agreement between the troika and Cyprus,” said an EU source, referring to the president of the European Council and Cyprus’s trio of creditors: the European commission, the European Central Bank and the International Monetary Fund.
A meeting of eurozone finance ministers which started six hours late reached an agreement in the early hours of Monday morning to finalise the fine print of the deal. Savers with deposits of less than €100,000 (£85,000) would be spared, but it was thought there would be heavy losses inflicted on the deposits of the wealthy.
Laiki, or Cyprus Popular Bank, is to be closed, with its good assets transferred to Bank of Cyprus, the country’s biggest bank, where savers would suffer big losses in return for equity shares. Those with more than €100,000 in Laiki would also be hit hard.
Negotiations got under way amid a hardening of the stance by the IMF and Germany, which insisted that depositors must take the hit for bailing out the eurozone’s latest crisis economy.
There were signs of panic in Cyprus as a €100 limit was imposed on ATM withdrawals, with more stringent capital controls to follow if the deal is finalised.
The European Central Bank had threatened to cut off funds propping up Cypriot banks on Monday, precipitating the island’s exit from the euro if agreement was not reached at the emergency meeting.
“The numbers have not changed. If anything they’ve got worse,” said Wolfgang Schäuble, Germany’s finance minister. He said that last week’s agreement to raise €5.8bn – details of which were rejected by Cyprus – had to be achieved. This time, however, savers with less than €100,000 will be spared, meaning the burden falls much more heavily on the wealthy than the 9.9% levy proposed last week for their accounts.
Germany is determined that the island deflate a bloated financial sector that exceeds the size of the Cypriot economy by a factor of seven.
“It is well known that I won’t allow myself to be blackmailed, by no one or nothing,” said Schäuble. “I’m aware of my responsibility for the stability of the euro. If we take the wrong decisions, we’ll be doing the euro a great disservice,” he told a German Sunday newspaper.
Russians are estimated to hold more than €20bn of the €68bn deposited in Cypriot banks. Bank of Cyprus holds €28bn in deposits although it was not clear how much of that would qualify for the “haircut”.
But it was clear that the losses would amount to several billion.
Cypriot president Nicos Anastasiades held meetings with EU officials in Brussels before the meeting of the euro group – the 17 finance ministers of the single-currency area – which included troika representatives Christine Lagarde, head of the IMF, Mario Draghi, president of the ECB, and Olli Rehn, European commissioner for economic and monetary affairs.
Little progress was reported from the earlier meetings on resolving the stalemate over how to structure a €17bn bailout, with creditors unwilling to offer more than €10bn, while expressing dissatisfaction with Cypriot proposals to supply the remainder.
The agreement outlined early on Monday came close to what Lagarde had demanded a week ago and which had been rebuffed by Anastasiades.
Over the weekend, Nicosia moved on legislation to wind up Cyprus Popular Bank and introduce capital controls to try to prevent a bank run and the flight of money out of the country.
guardian.co.uk © Guardian News and Media 2013
[Image via AFP]
Trump’s racism is ‘disqualifying’ for him to remain as president: former White House lawyer
Former acting Solicitor General Neal Katyal explained on MSNBC on Thursday why he viewed President Donald Trump's racist attacks on four women of color in Congress as disqualifying.
Anchor Brian Williams read a quote from Susan Glasser of The New Yorker.
"Half of the country is appalled but not really sure how to combat him; the other half is cheering, or at least averting its gaze. This is what a political civil war looks like, with words, for now, as weapons," Glasser wrote.
Lawrence O’Donnell reports on the growing movement for the impeachment of President Donald Trump
Anchor Lawrence O'Donnell reported on the growing movement for the impeachment of President Donald Trump during Thursday evening's "The Last Word" on MSNBC.
"The House of Representatives conducted a symbolic vote on a hastily written impeachment resolution by Democratic Congressman Al Green in reaction to the president’s tweeted comments that the House of Representatives voted to condemn as racist," O'Donnell reported. "The impeachment resolution had nothing to do with the [Robert] Mueller investigation and referred only to the president being unfit for office because of the language that he has used recently about members of Congress and immigrants and asylum seekers."
Video proves how far the Trump’s GOP has gone from the era of Ronald Reagan and HW Bush
The immigration policies of Donald Trump’s presidency would have no room for his GOP predecessors Ronald Reagan or George H.W. Bush—who both embraced work visas, family unification, easy border crossings and a better relationship with Mexico.
That counterpoint can be seen in a very short video clip from the 1980 presidential election where Reagan and Bush—who became Reagan’s vice president for two terms before winning the presidency in 1988—were asked about immigration at a campaign debate in Texas. Their responses show just how far to the right the Republican Party’s current leader, President Trump, and voters who have not left the GOP to become self-described political independents, have moved on immigration.