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Monday, March 25, 2013

Cyprus Salvaged After EU Deal Shuts Bank to Get $13B

English: Various Euro bills.
English: Various Euro bills. (Photo credit: Wikipedia)
By Bloomberg

Berlin, Mar.25, stock stock .- Cyprus dodged a disorderly default and unprecedented exit from the euro currency by bowing to demands to shrink its banking system in exchange for a 10 billion euros ($13 billion) of aid.
Cypriot President Nicos Anastasiades agreed to shut the country’s second-largest bank under pressure from a German-led bloc in a night-time negotiating melodrama that threatened to rekindle the debt crisis and rattle markets. “It’s been yet another hard day’s night,” European Union Economic and Monetary Affairs Commissioner Olli Rehn told reporters in Brussels early today. “There were no optimal solutions available, only hard choices.”
It was the second time in nine days that Cyprus struck a deal with its euro partners and the International Monetary Fund, capping a tumultuous week that underscored the contradictions of the crisis management that has dominated European policy making for more than three years. Cyprus, the euro area’s third- smallest economy, is the fifth country to tap international aid since the crisis broke out in Greece in 2009.
The first Cypriot accord, reached March 16, fell apart three days later when the parliament in Nicosia rejected a key plank, a tax on all bank accounts that sparked the indignation of smaller depositors. Efforts to win an alternative bailout fromRussia, which lent Cyprus 2.5 billion euros in 2011 when the nation was shut out of international markets, failed.

‘Playing Games’

“Nobody knows where we are heading,” said Epifanos Epifaniou, 50, who used to drive a delivery truck in Nicosia and has been unemployed for six months. “People are playing games with Cyprus. We are alone. Nobody is supporting us.”
The euro strengthened, trading 0.2 percent higher against the dollar at $1.3018 as of 11:03 a.m. in Frankfurt. Stocks gained, with the Stoxx Europe 600 Index rising 0.9 percent. Italian 10-year bonds erased their decline since last month’s inconclusive election..
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