* Cyprus concludes bailout talks with troika, aid to flow in
* Finance minister bows out, says his job is done
* Judges asked to probe economic demise
By Michele Kambas
NICOSIA, April 2 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 percent. 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,
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.
In the event, there was no run.
PROBE FOR POSSIBLE OVERSIGHTS
Conservative President Nicos Anastasiades, in the job for a
little over a month, appointed judges on Tuesday to investigate
possible political and regulatory failures in the island's
economic demise, as well as the role of banks.
Sarris, who was dispatched to Moscow last month but returned
empty-handed as Cyprus sought Russian aid after parliament
rejected a European bank levy proposal, said his main goal of
agreeing a deal with lenders had been accomplished.
But he said it was also appropriate to resign since his
previous role as chairman of the Popular Bank, or Laiki, - the
island's second largest lender wound down under terms of the
bailout - was also likely to come under scrutiny.
"I believe that in order to facilitate the work of
(investigators) the right thing would be to place my resignation
at the disposal of the president of the republic, which I did,"
said Sarris, who headed Popular for a few months in 2012.
Anastasiades, who appointed three retired Supreme Court
judges to run the inquiry on Tuesday, said nobody would be
exempt from the probe, starting with the legal business he once
headed, and family connections.
A list of business which had moved money out of Popular in
the run up to the bailout deal included a company in Limassol,
whose owners are related to Anastasiades by marriage.
The list, produced in the Communist party newspaper Haravghi
on Sunday and reproduced by other media, said the company, A.
Loutsios and Sons, had moved some 21 million euros out of the
The company said it had moved 10.5 million euros to Barclays
Bank Plc in Britain, and the remaining amount to Bank of Cyprus
in order to complete real estate transactions.
"We do not hide behind companies but acted, as we always do,
with full transparency in our banking transactions," the company
said, referring to the fact it was clearly identifiable in the
"Our actions are always based on sound business motives and
as such, any implication of alleged privileged access to
information is nothing but malicious and slanderous," it said.
An earlier statement by the company said it had a balance of
uninsured deposits in Popular, now being wound down, of 7.32
million. It also had uninsured deposits of 20.6 million in Bank
of Cyprus, part of which was being converted to bank equity
under a process to make depositors pay for recapitalising the
bank, known as a "bail-in".
Sarris will be replaced with Harris Georgiades, who has held
the labour ministry post in Anastasiades's four-week
Cyprus's previous Communist administration first sought aid
from the "Troika" of IMF, EU and European Commission last year.
That government was severely criticised for passing the buck
onto the incumbent conservatives knowing full well they could
not win general elections held last February.
"Unquestionably, the deal with the Troika should have been
completed earlier," said Stylianides, the spokesman.
Cyprus earlier announced a partial relaxation of currency
controls, raising the ceiling for financial transactions that do
not require central bank approval, but keeping most other
restrictions in place.
Before resigning, Sarris said it was not clear when the
remaining capital controls would be lifted. "We would want to
ease restrictions the soonest possible, but also have to ensure
that stability (in the banking system) prevails," he said.
The island introduced curbs on money movements when banks
reopened on March 28. A finance ministry decree on Tuesday, the
third since controls were first introduced, raised the ceiling
on transactions which do not require central bank approval to
25,000 euros from 5,000 euros. It also permits the use of
cheques worth up to 9,000 euros per month.
Other restrictions introduced last week, including a 300
euro per day cash withdrawal limit and a 1,000 euro limit on the
amount travellers can take overseas, remain in place.
The decree - signed by Sarris and dated April 2 - is valid
for two days. Cypriot officials have said it could take up to a
month for restrictions to be fully removed.
Cyprus last week agreed to break up its No. 2 lender
Popular Bank, kept on an ECB liquidity lifeline for
months, into a "good" and a "bad" bank. The bank's "good" assets
will be transferred to Bank of Cyprus, where depositors
have been forced into accepting massive losses on uninsured
deposits of more than 100,000 euros.
The process sees 37.5 percent of deposits exceeding 100,000
euros converted into equity in the bank, and an additional 22.5
percent used as a buffer which could also be converted into
equity if circumstances warrant it.
In a deal brokered early on Tuesday morning, it was also
agreed that a small portion of the remaining 40 percent in
uninsured deposits effectively frozen under the arrangement, 10
percent, be unblocked.