Cyprus has accepted harsh terms for a financial rescue demanded by the International Monetary Fund (IMF) and the European Union (EU) for the debt-choked nation to receive a desperately needed loan.
Early Saturday the nation’s parliament, which has been in negotiating for days with the IMF, the EU and the European Central Bank, known collectively as the troika, accepted the troika’s unprecedented demand that it assess a one-time levy on residents’ bank deposits, China’s Xinhua news agency said.
The levy, public fears of which sparked a run on automatic teller machines over the weekend, is part of a package of concessions that Cyprus is making to raise €5.8 billion ($7.5 billion) – a step it had to take by Monday or face a cut-off of ECB emergency cash injections.
The government will take 9.9 percent of the balance in bank deposits with a balance of more than €100,000, while it will take 6.75 percent of bank balances that are €100,000 or less.
Jeroen Dijsselbloem, leader of the European lending group, announced the agreement after a meeting of euro zone finance ministers, which was also attended by IMF chief Christine Lagarde, Xinhua said.
Cypriot lawmakers also passed legislation to create a "solidarity fund" to pool state assets and impose capital controls on its banks, something that clearly anticipates a run on the island’s banks once they are allowed to open, MarketWatch said. the banks have been closed all week for fear of a bank run.
Cyprus had run out of alternatives to the troika rescue. Hopes that Russia, whose oligarchs and billionaires account for about a third of Cypriot bank deposits, rejected pleas from Cyprus to help -- despite the fact that Russian depositors are expected to lose some €2 billion or more because of the now-accepted plan to take money from depositors.
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