Crisis in Cyprus: From the Banks to the Barricades
(NICOSIA, Cyprus) -- Do not adjust your TV sets. Those are not members of the opposition party protesting outside your parliament. They are not anti-government communists. They are your bank tellers.
For the second straight day, employees of Cyprus’ second largest bank are demonstrating in the middle of the capital, angry that their bank is not going to survive — at least in its current form — the financial crisis.
Inside, the politicians and bankers and economists are back at the negotiating table, trying to create a Plan B that would save the country’s economy before it collapses on Tuesday. That’s when the banks will run out of money; Cyprus needs a huge loan agreement with Europe before then to keep the banks afloat.
The new plan will include nationalizing pensions, issuing a new national bond, restricting people’s ability to withdrawal money, and, most likely, splitting the second largest bank in two:
- One “good” bank will take on the performing loans and all the deposits in accounts worth less than 100,000 euros (the upper limit of European deposit insurance).
- The “bad” bank will take on all the worthless investments in Greece and the accounts with more than 100,000 euros. The 10,000 account holders who have a lot of money in their account — well, they could be in trouble.
There’s no guarantee the parliament will agree on the plan and there’s no guarantee Europe will approve the plan. Both steps have to occur for Cyprus to avoid default and, risk having to leave the Eurozone.
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