Brussels – Cyprus has chosen the least painful solution, the country’s Finance Minister Michalis Sarris has said about a bailout agreement, reached after lengthy negotiations early this morning in Brussels at a Europegroup meeting.
The Cypriot representation to the meeting, he noted, arrived under very difficult circumstances because the country was facing an emergency situation and bankruptcy was one of available options.
“Negotiations were very hard. The IMF and some of our partners adopted a harsh stance which created a heavy climate. Talks on the level of technocrats often reached a deadlock,” Sarris told a press conference early on Saturday morning in Brussels, after the Eurogroup meeting.
The Minister said that the agreement restores trust in the economy, avoids disorderly bankruptcy and the collapse of the banking system.
Cyprus and Eurogroup reached a political agreement on the bailout programme totaling 10 billion euros for the Cyprus economy, following ten hours of talks in the Belgian capital.
The agreement includes an unprecedented one-off levy on bank deposits to raise 5.8 billion euros and an increase in corporate tax from 10% to 12.5%.
Cyprus becomes the fifth country after Greece, Ireland, Portugal and Spain to turn to the euro zone for financial help in the wake of the region`s debt crisis.
The President of the Republic Nicos Anastasiades, he noted, fought a brave battle on a political level, meeting with Eurozone officials and European leaders and managed to create a better climate of credibility.
He said that additional wage and pension cuts have been prevented, securing social cohesion, and provident funds of semi government organizations and banking institutions are not part of the deal.
Sarris said the final amount that will be given will make the debt manageable and will distribute in a fair manner the unbearable burden between the present and the generations to come.
“We have managed to avoid any tax on financial transactions that would be catastrophic for our economy”, he added.
The Finance Minister said that due to the serious threat against banks and the chaos that would have followed from a negative initiative on the part of the European Central Bank, agreement was reached on an increase in interest and a one off solidarity and stability levy on deposits, at 6.75% on deposits less than 100,000 euro and 9,9% on deposits over this amount.
“We believe this was an historically difficult decision, despite its harsh aspects, and averts disorderly bankruptcy of our country, restores confidence and gives us the opportunity to proceed decisively to a new beginning”, he added.
Sarris pointed out that the decision is subject to the approval of the Cabineet and the House of Representatives which will adopt the necessary legislation before banks open on Tuesday morning (Monday is a public holiday in Cyprus).
The Eurogroup decision does not preempt any decision the House may take, the Minister said, adding that MPs have shown responsibility and understanding.
Answering a question, Sarris said that bearing in mind that the size of the banking system will be significantly reduced, it would be good if the Cyprus banks branches in Greece were to be absorbed by local organizations.
“I believe today’s agreement is in the interest of Cyprus and all depositors of this and the next generation. We opted for the least painful solution. We believe that our banks with a new size, operating in an economy with natural gas prospects, will render the shares they will give to their depositors the best option under the current harsh conditions,” he concluded. (CNA)