A EUR 10bn bailout deal for Cypruss was struck in the early hours of Monday morning, 25 March. Basically, what has been agreed in overnight negotiations over the weekend is that small depositors (up to 100 000) in Cypriot banks should be free of penalties that have been proposed in earlier resolutions. But beyond that, the hit is going to be all the more severe. In addition to closing the island's second-largest bank, the agreement inflicts huge losses on wealthy savers. Those with deposits of over EUR 100,000 – many of them Russian – will lose billions of euros under draconian terms aimed at preventing Cyprus from becoming becoming the first country forced out of the single currency.
The deal is expected to wreak lasting damage on the Cypriot economy, which has grown reliant on offshore banking and Russian money. Analysts said Cyprus could see its economy contract by 10% or more in the years ahead.
Dutch Finance Minister Jeroen Dijsselbloem, who heads the Eurogroup of euro zone finance ministers, says the rescue programme agreed for Cyprus on Monday represents a new template for resolving euro zone banking problems and other countries may have to restructure their banking sectors.
Europe's economics commissioner, Olli Rehn, commented: "The near future will be very difficult for the country and its people."