Protesters face off with security forces in Nicosia, Cyprus.
Protesters facing off with security forces in Nicosia, Cyprus. Photo by Reuters
Text size

Major depositors in Cyprus’ biggest bank will lose around 60% of savings over 100,000 euros, its central bank confirmed Saturday, sharpening the terms of a bailout that has shaken European banks but saved the island from bankruptcy.

Initial signs that big depositors in the Bank of Cyprus would take a hit of 30% to 40% − the first time the euro zone has forced bank customers to contribute to a bailout − had already unnerved investors in European lenders last week.

But the official decree published Saturday confirmed news reports a day earlier that the bank would give depositors shares worth just 37.5% of savings over 100,000 euros.

The rest of such holdings might never be paid back. The toughening of the terms sends a clear signal that the bailout means the end of Cyprus as a hub for offshore finance and could accelerate economic decline on the island and bring steeper job losses.

Banks reopened to relative calm on Thursday after the imposition of the first capital controls the euro has seen since it was launched a decade ago. The streets of Nicosia were filled with crowds relaxing in its cafes and bars yesterday, but popular anger was not hard to find.

“Europe shouldn’t have allowed this disaster to happen here. Cyprus was paradise and they’ve turned it into hell,” said Tryfonas Neokleous, owner of a clothes shop on a cobbled street in the center of the city.

There are no signs for now that bank customers in other struggling euro zone countries like Greece, Italy or Spain taking fright at the precedent set by the bailout.