Amid the lasting euro zone crisis, yet another country was hit with the tide as Cyprus clings on to the bail out plans purported by its creditors: the European commission, the ECB and the IMF. Having a hard time adjusting with the alarming economic downfall Government of Cyprus has had to rely on the only readily available source among its options.
In order to raise the decided 5.8 billion Euros the Cypriot government will have to pay heed to some of the rather stringent and less welcome capital controls and orders. As a part of the settlement plan put forward by the aforementioned financial aides, the second largest bank in the country will have to be closed down. An expected result would be huge losses faced by wealthy savers.
According to the bailout plan’s terms; Laiki, commonly known as the Cyprus Popular Bank will be forced to shut down with all the big savers would also suffer tragic losses in lieu of equity shares. It has been decided that any of the depositors with an amount of less than a hundred thousand Euros in Laiki would be spared, while the rest would be subject to a portion of the hit for bailing out euro zone’s latest crisis economy. The aforementioned was brought into action after IMF hardened its stance towards the first country being forced out of the common currency; euro. The major reason behind this change of tone has been a great level of pursuance at the hands of Germany. German finance minister Schauble believes: “the situation has worsened”
he further added that:
“It is well known that I will not let myself to be blackmailed by no one or nothing, I am aware of my responsibility for the stability of the euro. If we take the wrong decisions, we’ll be doing to Euro a great disservice”
The events leading to such drastic measures were evident as the recent threat by European Central Bank (ECB) to cut off all monetary support to Cypriot banks could have sealed the fate of Cyprus’ removal from the Euro, had the emergency meeting not been called among the country’s financial aid trio. It is expected that Russians will take the greatest hit as they apparently have the largest deposits in the said bank with an estimate going up to 20 billion Euro, out of the total 68 billion deposits in Cypriot banks.
In the recent days, Nicos Anastasiades President of Cyprus had held meetings with European Union officials before the meeting of the Euro group to discuss the final terms of the bailout. Apparently the drastic measures had to be taken because little or no progress was reported from the earlier meetings –the actual amount supposed to be raised was 17 billion Euro out of which creditors were ready to pay for only 10 billion. Now the agreement that was finalized on Monday would help reduce the deficit, though not on the terms of Anastasiades.
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