The euro zone struck a deal on Saturday to hand Cyprus a bailout worth 10 billion euros ($13 billion), but demanded depositors in its banks forfeit some money to stave off bankruptcy despite the risks of a wider bank run.
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.
In a radical departure from previous aid packages, euro zone ministers forced Cyprus’ savers, almost half of whom are believed to be non-resident Russians, to pay up to 10 percent of their deposits to raise almost 6 billion euros.
“I wish I was not the minister to do this,” Cypriot Finance Minister Michael Sarris said after 10 hours of late-night talks where euro zone finance ministers agreed the package.
“Much more money could have been lost in a bankruptcy of the banking system or indeed of the country,” he said, adding that he hoped a levy and bailout would mark a new start for Cyprus.
Without a rescue, Cyprus would default and threaten to unravel investor confidence in the euro zone that has been fostered by the European Central Bank’s promise last year to do whatever it takes to shore up the currency bloc.
But on the Mediterranean island, initial incredulity at the decision gave way to anger.
Co-op credit societies, normally open on Saturdays, were shut for business in the coastal town of Larnaca as depositors started queuing early in the morning to withdraw their cash.
“I’m extremely angry. I worked years and years to get it together and now I am losing it on the say-so of the Dutch and the Germans,” said British-Cypriot Andy Georgiou, 54, who returned to Cyprus in mid-2012 with his savings.