Cyprus Finance Minister quits after bailout concludes, investigation begins

Thursday, 4 April 2013 00:24 - - {{hitsCtrl.values.hits}}

Reuters: Cyprus’s Finance Minister resigned on Tuesday after concluding a 10 billion euro bailout deal with international lenders in which the country slashed its dominant banking sector and hit depositors with losses.

Michael Sarris, a lead player in talks with International Monetary Fund and European Union lenders, said he had completed his task but also that he was likely to come under scrutiny in an investigation into the crisis.

Tuesday’s deal, which requires ratification from national EU parliaments and euro zone finance ministers, will see Cyprus receiving a 10 billion euro loan, carrying an interest rate of approximately 2.5%. It is repayable over a 12-year period after a grace period of a decade.

“This is a very important development which ends a very long period of uncertainty,” said Christos Stylianides, Cyprus’s Government Spokesman. Sarris said he expected the first disbursement of aid in May. Compared with a previous draft deal with lenders brokered in November, Tuesday’s agreement gave authorities additional room to reach a primary surplus by 2018, longer than an initial 2016, Stylianides said.

Cyprus’s status as a financial hub, meanwhile, has all but crumbled in the space of a fortnight. Authorities were forced to wind down one bank and impose heavy losses on wealthier depositors in a second in return for the financial aid.

When banks reopened after a two-week lockdown last week, Cypriots were faced with currency controls to prevent a run on banks, unprecedented in the history of the 17-member euro zone.