A protestor waves a Cyprus flag in front of riot policemen during an anti-bailout rally outside of European Union house in Nicosia, Cyprus, Sunday, March 24, 2013. After failing for a week to find a solution to a crisis that could force their country into bankruptcy, Cypriot politicians turned to the European Union on Sunday in a last-ditch effort to help the island nation forge a viable plan to secure an international bailout. (AP Photo/Petros Karadjias)
BRUSSELS (AP) — Cyprus secured a 10 billion euro ($13 billion) package of rescue loans in tense, last-ditch negotiations early Monday, saving the country from a banking system collapse and bankruptcy that could have destabilized the entire euro area.
“We’ve put an end to the uncertainty that has affected Cyprus and the euro area over the past week,” said Jeroen Dijsselbloem, who chairs the meetings of the 17-nation eurozone’s finance ministers.
In return for the bailout, Cyprus must drastically shrink its outsized banking sector, cut its budget, implement structural reforms and privatize state assets, he said. The country’s second-largest bank will be shut down immediately, with all bond holders and people with more than 100,000 euros in their bank accounts there facing significant losses. The measures are likely to deepen the recession in Cyprus and lead to more job losses.
The cash-strapped Mediterranean island nation has been shut out of international markets for almost two years. It first applied for a bailout to recapitalize its ailing lenders and keep the government afloat last June, but the political negotiations stalled. After a botched agreement last week, the European Central Bank moved forcefully to focus leaders’ minds, threatening to cut off crucial emergency assistance to the country’s banks by Login to read more