Cyprus Finance Minister Michalis Sarris has decided to resign after completing talks on the controversial IMF-EU bailout deal.
Michalis Sarris will be replaced by Labour Minister Haris Georgiades, reports in the local media suggest.
Cyprus Finance Minister Michalis Sarris has decided to resign after completing talks on the controversial IMF-EU bailout deal
The 10 billion-euro ($13 billion) deal – agreed by the EU and IMF – originally envisaged a levy on all Cypriot bank depositors, triggering public anger.
Under the revised deal, Bank of Cyprus depositors with more than 100,000 euros could now lose up to 60% of their savings.
On Tuesday, Cyprus’ government said that President Nicos Anastasiades had accepted the resignation of Michalis Sarris, who had been under fire for his handling of the bailout deal.
Nicos Anastasiades earlier ordered an investigation into what led Cyprus to the brink of bankruptcy before it was forced to accept tough bailout conditions.
The inquiry will be carried out by a three-judge panel.
Cypriot Finance Minister Michalis Sarris has confirmed that the depositors with less than 100,000 euros in their accounts “will not be hit”.
People with more than 100,000 euros in their accounts could see about 40% of their deposits converted into bank shares, Michalis Sarris said.
“The exact percentage is not… yet decided but it is going to be significant,” he said.
The final figure will depend on how the government decides to protect pensions.
The finance minister confirmed that all Cypriot banks will remain closed until Thursday and that capital controls will be placed on the size and the amount of money people will be allowed to withdraw once they have reopened.
Cyprus bank deposits over 100,000 euros could be cut by 40 percent
These restrictions would “probably be a bit stricter” on the country’s two largest banks, Bank of Cyprus and Laiki, and would remain in place until the banking system “stabilizes”, Michalis Sarris said.
The exact details of this “two tier system” would be hammered out with the banks later on Tuesday, he said.
Michalis Sarris is expecting “some bleeding, some outflow” of funds once the banks reopen, but believes that once EU bailout funds begin flowing “in a matter of weeks”, confidence will return.
Although the economy would be badly hit by the economic crisis, Michalis Sarris admitted, he maintained that it could benefit from “an energy boom”, referring to the exploratory Aphrodite gas fields off the southern coast of the island.
“Yes, there will be a problem but we will overcome it in a relatively short period of time,” he said. He also said his government had renegotiated more favorable loans terms with Russia.
The Cypriot authorities had said all but the biggest two banks would open on Tuesday.
Banks have not been open since March 15. Their reopening had been expected after Cyprus agreed a deal with the IMF and the EU that releases 10 billion euros in support.
It was conditional on Cyprus itself raising 5.8 billion euros, most of which looks likely to come from depositors with more than 100,000 euros in Bank of Cyprus and Laiki or Popular Bank.
The banks remained closed after the country’s first money-raising solution, which would have hit smaller deposit holders as well as larger holdings, was rejected by parliament.
The new deal for Cyprus, unlike previous agreements, does not require parliamentary approval. It will also include austerity measures and tax increases.
Laiki will be shut down, and deposits under 100,000 euros, which are guaranteed by the state under EU law, will move into the Bank of Cyprus to create a “good bank”.
Deposits above that insured amount will be frozen and used to pay Laiki’s debts and recapitalize the Bank of Cyprus, with depositor losses eventually converted into shares.
Major depositors, many of whom are wealthy Russians, will not be able to access accounts exceeding the 100,000-euro limit until the restructuring of the banks is complete.
