Cyprus bailout deal agreed

25 March, 2013

Robin Haynes

Eurozone finance ministers have agreed a deal to avoid the prospect of bankruptcy for Cyprus, while avoiding the proposed tax on small savers on the island. Instead, the country’s second biggest bank, Laiki, will be broken up and holders of deposits of over €100,000 will be facing heavy losses.

The deal, struck overnight, means Cyprus can receive access to its €10bn bailout fund, and avoid the prospect of becoming the first state to leave the Euro.

The head of the IMF, Christine Lagarde, said the deal was “a comprehensive and credible plan” to help restore trust in the banking system, but when banks in Cyprus re-open tomorrow we could still see mass withdrawals among general public anger over the financial situation on the island.

The Euro itself has strengthened a little this morning, but rates for buying Euros are still better than they were 10 days ago before the crisis, so the next couple of days could still be good for any of you with requirements to make payments to the single currency area.

Away from the Euro, we have also seen the Pound improving against most major currencies, after last week’s retail sales figures for the UK were better than expected. This week we have mortgage approvals out this morning, and the final revision to Q4 GDP on Thursday, but with a short week ahead there is not much major data due out. If you have payments to make before the Easter break, contact us at Currency Index so we can help ensure your transfer is not affected by the bank holidays.