Cypriot banks to stay shut

The Central Bank of Cyprus and Finance Minister Michalis Sarris announced late on Monday that no Cypriot banks would open their doors on Tuesday or Wednesday. Instead, all the country's lenders were scheduled to open up again on Thursday.

Earlier on Monday, the central bank had said that every bank except the two largest in Cyprus, Laiki Bank and the Bank of Cyprus, would re-open on Tuesday. With all Cypriot banks shuttered since March 15, this prompted speculation of customers racing to withdraw their savings.

Cyprus reached a last-minute deal early Monday morning with European partners on a series of emergency loans worth around 10 billion euros ($12.86 billion). Cyprus was under pressure to raise around 6 billion euros itself, with the majority of that now set to hail from large bank accounts.

Under the terms of this rescue, customers with accounts containing more than 100,000 euros will pay an as yet unspecified levy towards recapitalizing Cypriot banks. Cyprus government spokesman Christos Stylianides told state radio that uninsured depositors would face losses "under or around 30 percent," although other estimates stretched higher.

The initial proposal, which would have affected all savers, was rejected by the Cypriot parliament amid public outrage.

Anastasiades returns after eleventh-hour deal

In a televised speech on Monday evening, delivered before the announcement that all banks would stay shut for two more days, President Nicos Anastasiades said "very temporary restrictions" would be implemented on cash withdrawals from banks when they reopened, without providing specific details.

"The agreement we reached is difficult but, under the circumstances, the best we could achieve," Anastasiades said, returning from negotiations on the Cypriot "bailout" in Brussels. "It's been a difficult fight but we leave behind the uncertainty that we've had over the last months. We look with optimism to the future. There's a new day for Cyprus tomorrow."

German Chancellor Angela Merkel said on Monday that she was satisfied with the outcome in Brussels, saying it was a fairer form of solution for Cyprus.

"I am very pleased that a solution for Cyprus was successfully reached last night which meant that the country's insolvency was avoided," Merkel said. "On the one hand, the banks must take responsibility for themselves. That's what we have always said. We don't want taxpayers having to save banks but that banks save themselves."

The new system of asking banks and their customers to shoulder a share of the burden rather than using tax revenues was also praised by Dutch Finance Minister Jeroen Dijsselbloem, who was a key negotiator in his role as the head of the "Eurogroup" countries that use the single European currency.

"If the bank can't do it, then we'll talk to the shareholders and the bondholders, we'll ask them to contribute in recapitalizing the bank, and if necessary the uninsured deposit holders," Dijsselbloem said.

When markets began wavering, after a strong start on Monday, amid speculation that this Cypriot approach might be the shape of a "model" for any future rescue packages, the Eurogroup head later added a clarification saying that Cyprus was "a specific case with exceptional challenges."

As well as the opening uncertainties, Cyprus' two largest lenders face wholesale reform. Cyprus Popular Bank, more commonly known as Laiki, will effectively close its doors. Its assets that are deemed safe will be incorporated into the country's largest lender, the Bank of Cyprus, while the remainder will be consigned to a so-called bad bank. Cyprus' central bank has already introduced a 100-euro daily limit for withdrawals from ATM machines for customers of both these banks in a bid to avert a run.

msh/jm (AFP, AP, dpa, Reuters)