Cyprus Bailout Gets Even Worse

The amount Cyprus will have to pay to fix its financial sector jumped by €6 billion, Cyprus announced April 11. Originally, Cyprus was going to receive €10 billion from international lenders, and raise €7 billion itself. Now, the latter figure is €13 billion.

Cypriot President Nicos Anastasiades wrote to European Commission President José Manuel Barroso and European Council President Herman Van Rompuy pleading for more money, but he was ignored. Germany made it clear it was not willing to give any extra.

If Cyprus cannot come up with the extra cash itself, “the assent of the German Bundestag next week is out of the question,” said Christian von Stetten of the Germany Parliament’s finance committee.

To fund this, an estimated €8.3 billion will be taken out of bank accounts in Laiki and the Bank of Cyprus, Reuters reported April 15, citing a leaked European Commission document.

As agreed earlier, those with money in Laiki have lost everything above €100,000. Depositors in Cyprus’s largest bank, Bank of Cyprus, face an uncertain future. They will definitely lose 37.5 percent of everything over €100,000 that they’ve deposited. They will have to keep another 22.5 percent in their bank account for two or three months, just in case the government needs to take more. Depositors will receive no interest on this. And the remaining 40 percent must be kept in the bank account for six months, to stop a run on the bank. During that time, the government could decide that it needs some, or all, of this money too.

So those with deposits in the Bank of Cyprus have effectively also lost all their money above €100,000. They just have to wait to find out if they will get any of that money back.

Full article: Cyprus Bailout Gets Even Worse (The Trumpet)

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