WASHINGTON, March 25 The U.S. Treasury
Department said Cyprus' last-ditch agreement with international
lenders could help avert an economic meltdown, adding that it
protects insured depositors and shutters troubled banks.
Cyprus will receive a 10 billion euro ($13 billion) rescue
package to prop up its troubled banking system, in return for
closing down its second-largest bank and inflicting heavy losses
on big depositors.
"It is critical to lay the foundation for a return to
financial stability and growth in Cyprus," the Treasury said in
a statement on Monday, adding that financial stability in the
euro zone is important to the United States. The European Union
is the United States' largest trading partner.
"The agreement in Cyprus fully protects insured depositors,
which is important, while resolving and recapitalizing troubled
banks," Treasury added.
"We will continue monitoring developments closely as details
are finalized and the agreement is implemented."
Cyprus's banking sector, with assets eight times the size of
the economy, has been crippled by exposure to Greece, where
private bondholders suffered a 75 percent "haircut" last year.
Without a deal by the end of Monday, the European Central
Bank said it would have cut off emergency funds to the banks,
spelling certain collapse and potentially pushing the country
out of the euro.
As such, the ECB on Monday decided to give Cypriot banks
access to emergency central bank funding after the country
struck its bailout deal.