BRUSSELS Euro zone ministers struck a deal on Saturday to hand Cyprus a bailout worth 10 billion euros ($13 billion) to stave off bankruptcy. Under the program, the island's debt should fall to 100 percent of economic output by 2020.
Here are the outlines of the financial package:
- Nicosia will impose a 9.9 percent one-off levy on deposits above 100,000 euros in Cypriot banks and a tax of 6.75 percent on smaller deposits from March 19. The levy will generate 5.8 billion euros.
Depositors will be compensated by equity in the banks.
There will also be a tax on interest that the deposits generate.
- Cyprus has agreed to increase its nominal corporate tax rate by 2.5 percentage points to 12.5 percent, which could bring in up to 200 million euros a year.
- The International Monetary Fund is expected to contribute to the rescue package, but the amount is still to be determined.
- Russia will likely help finance the program by extending a 2.5 billion euro loan already made to Cyprus by five years to 2021 and reducing the interest rate, which is now at 4.5 percent.
- Cyprus may be required to privatize the Cypriot telecoms company, the electricity company and the ports authority.
- Cyprus will have to downsize its banking sector, reducing it to the EU average by 2018. The size of the banking sector in Cyprus is more than eight times the size of the economy, compared to around 3.5 times in the EU.
(Reporting by Robin Emmott)