Cyprus Deal Wallops Rich Russians

World markets rise after last-minute deal

By Rob Quinn,  Newser Staff

Posted Mar 25, 2013 3:48 AM CDT | Updated Mar 25, 2013 8:00 AM CDT

(Newser) – The last-minute rescue deal to prevent a complete collapse of the Cypriot economy has saved the eurozone from its first exit and boosted world markets—but at a heavy cost to those who stashed their cash in the country's banks. The deal, which shuts down the country's second-biggest bank, spares small depositors but will leave those with more than the equivalent of $130,000 in the bank facing a levy predicted to be in the neighborhood of 30%, the Guardian reports.

Much of the cash deposited in the country's banks belongs to wealthy Russians, who are expected to lose billions of dollars under the deal, adds Reuters. The deal also calls for Cyprus to dramatically shrink its bloated banking sector, privatize state assets, and cut its budget, the AP reports. The deal must still be approved by parliaments in EU countries including Germany, and large bank deposits will be frozen until the size of the levy needed is known. Over at the BBC, Stephanie Flanders notes that the deal is hardly fair in light of other, more generous bailouts. But "Cypriots held out too long"—world markets are now stable enough that EU and IMF officials think they can handle making an example of Cyprus without the euro imploding.

Bank employees, thousands of whom stand to lose their jobs, protest outside the ministry of finance in Nicosia on the weekend.
Bank employees, thousands of whom stand to lose their jobs, protest outside the ministry of finance in Nicosia on the weekend.   (AP Photo/Petros Giannakouris)
A man passes a closed Bank of Cyprus branch in Nicosia yesterday.
A man passes a closed Bank of Cyprus branch in Nicosia yesterday.   (AP Photo/Petros Karadjias)
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