BRUSSELS - The eurozone told Cyprus on Monday to ditch the part of a hugely controversial 5.8-billion-euro grab on savings that stung even the smallest of account holders in exchange for a 10-billion-euro sovereign bailout deal, according to a statement issued after a conference call.
A decision by Cyprus to seize private bank account savings sent stocks down worldwide, as Cypriots staged a run on ATM machines to try to salvage their savings. (AP Photo)
The statement came after Cyprus baulked at putting the EU bailout to a vote in parliament as the crippling terms sparked a public outcry and mounting talk of a rethink by eurozone creditors, even as the uncertainty forced a prolonged closure of the island's banks.
Finance ministers "continue to be of the view that small depositors should be treated differently from large depositors and reaffirms the importance of fully guaranteeing deposits below 100,000" euros ($130,000), Eurogroup President Jeroen Dijsselbloem of The Netherlands said in the release.
A eurozone source spelled out when pressed that this meant preferably removing altogether a mooted 6.75-per cent levy applied to these accounts, which combined amount to more than three fifths of all Cypriot savings despite some 30 billion attributed to large Russian investors.
The economic and political fallout was huge following the early Saturday announcement that a raid on savings would be required alongside international loans to the Cyprus government in the fifth eurozone bailout of the three-year debt crisis.
Cyprus shut its banks through until Thursday at least and delayed a parliamentary vote on the package until Tuesday after large queues formed at ATMs on the island, while Russian President Vladimir Putin pounded a "dangerous" move and turmoil hit stock and currency trades amid concerns a precedent had been set for bigger debt-saddled eurozone economies like Italy and Spain.
The hastily-convened ministerial talks saw Dijsselbloem "reiterate that the stability levy on deposits is a one-off measure" which, he said, would "restore the viability of the Cypriot banking system" when applied in tandem with eurozone and International Monetary Fund loans.