The Associated Press
Some people with large bank deposits in Cyprus are set to lose as much as 40% of their funds under a new bailout plan proposed for the ailing island state.
News of the bailout steadied European markets on earlier this week, though a controversial comment by leading European finance official Jeroen Dijsselbloem has left many wondering if what’s happening in Cyprus could happen again.
Dijsselbloem said the Cyprus bailout was a template, leaving the impression that those with bank deposits above the uninsured level of 100,000 euros may be tapped in any future bailout.
Other top European bankers dismissed the idea, saying the solution agreed on for Cyprus cannot be a model for the Eurozone because Cyprus's situation is unique. It has an outsized financial sector, including large deposits from foreigners.
Under the new Cyprus bailout plan, the bulk of the funds will be raised by forcing losses on accounts of more than 100,000 euros in the country's second- largest lender, Laiki, with the remainder coming from tax increases and privatizations.
Laiki will be dissolved immediately into a so-called bad bank containing its uninsured deposits and toxic assets, with the guaranteed deposits being transferred to the nation's biggest lender, Bank of Cyprus.