‘THIS decision is painful for Cypriot people. This decision was a defeat,’ Cyprus Parliamentary Speaker Yiannakis Omirou said yesterday.
He was referring to the deal imposed on Cyprus in the early hours of yesterday morning by the Troika – the European Commission, the International Monetary Fund and the ECB.
The deal involves a tax of 40 per cent on bank deposits of over 100,000 euros, in return for a 10-billion-euro (USD 13 billion) bailout.
‘This decision was a defeat of solidarity, of social cohesion, which are fundamental freedoms, fundamental principles of the European Union,’ Omirou said.
‘So as soon as possible we have to prepare our economy to go out from the mechanism and the troika,’ he added.
The country’s banks were closed all last week and although for several days it has been reported that they are to open this morning, it remains to be seen if they will and what will happen if they do.
Yesterday one bank branch was hit by a home-made bomb.
The European Central Bank had threatened to cut off all emergency assistance to Cyprus from yesterday if no deal had been reached.
Without that funding, Cyprus’ banks would have collapsed.
Nicholas Papadopoulos, head of the Cyprus Parliament’s finance committee,’ said: ‘Nobody doubts that the Eurogroup decision and the agreement for our country’s loans from the troika is a very painful agreement.
‘The consequences for the Cypriot economy and the daily lives of all the citizens will be seen in practice.’
Under the deal Laiki, the country’s second-largest bank, will be closed, with all bond-holders and people with more than 100,000 euros in their accounts facing 40 per cent seizures.
The Laiki bank will be dissolved immediately into a ‘bad bank’ containing its uninsured deposits and toxic assets, with the ‘guaranteed’ deposits of under 100,000 euros being transferred to the nation’s biggest lender, Bank of Cyprus.
Deposits at Bank of Cyprus above the 100,000 euros insured level will be frozen.
The money from those deposits will eventually be converted into worthless bank shares.
The deal has not been subjected to a vote in the Cyprus parliament because the losses are part of a ‘restructuring’ of the island’s banks – which come under legislation passed last week – and not a tax.
Russian account-holders reportedly have 30 billion euros deposited in Cypriot banks.
Russia has strongly condemned the new bailout deal brokered between Cyprus and its international lenders, saying the agreement is tantamount to theft.
‘The stealing of what has already been stolen continues,’ Russian Prime Minister Dmitry Medvedev said on Monday, referring to the bailout deal between Nicosia and the troika of lenders.
Russian Deputy Prime Minister Igor Shuvalov warned: ‘Despite all the assurances that we’re receiving from the European Commission we fear that this could affect the stability of the euro, the stability of the eurozone and would send shockwaves to deteriorate the situation on the whole.’
Moscow announced plans to study the consequences of the bailout deal including restructuring a 2.5-billion-euro Russian loan previously issued to Nicosia.
People in Cyprus have taken to the streets to protest the bailout deal. They gathered outside the parliament in the capital Nicosia.
Cypriot protesters denounced their government, the EU and the IMF for their austerity policies.