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| Official Europe’s Reaction to Cyprus Deal Is Mixed | |
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| PARIS — Financial markets, which had begun the day buoyant Monday after Cyprus reached a late-night bailout agreement with international lenders, headed downward as the day wore on and investors and analysts began to digest the terms of the deal. | PARIS — Financial markets, which had begun the day buoyant Monday after Cyprus reached a late-night bailout agreement with international lenders, headed downward as the day wore on and investors and analysts began to digest the terms of the deal. |
| Reaction from European capitals was mixed. German officials greeted the deal with relief and sought to reassure Cypriots. But Russia’s prime minister, Dmitri A. Medvedev, decried it as “stealing,” referring to the provisions for a bank tax that could fall largely on Russian depositors. | Reaction from European capitals was mixed. German officials greeted the deal with relief and sought to reassure Cypriots. But Russia’s prime minister, Dmitri A. Medvedev, decried it as “stealing,” referring to the provisions for a bank tax that could fall largely on Russian depositors. |
| Even so, the Russian president, Vladimir V. Putin, instructed his government to reopen negotiations with the Cypriots to restructure a €2.5 billion, or $3.2 billion, loan that Russia provided to the island nation in 2011. Talks on extending the repayment period had broken off last week, as Moscow awaited the outcome of the bailout negotiations between Cyprus and the European Union. | Even so, the Russian president, Vladimir V. Putin, instructed his government to reopen negotiations with the Cypriots to restructure a €2.5 billion, or $3.2 billion, loan that Russia provided to the island nation in 2011. Talks on extending the repayment period had broken off last week, as Moscow awaited the outcome of the bailout negotiations between Cyprus and the European Union. |
| In Athens, a government spokesman said the deal was “painful” but necessary, while the president criticized the European Union for taking too tough a line with the Cypriot government. | In Athens, a government spokesman said the deal was “painful” but necessary, while the president criticized the European Union for taking too tough a line with the Cypriot government. |
| Casting a negative light were remarks by the Dutch finance minister, Jeroen Dijsselbloem, who heads the Eurogroup of finance ministers that helped forge the bailout pact. In an interview with Reuters, Mr. Dijsselbloem said the Cyprus bailout could be a new template for resolving regional banking problems by shifting more risk to depositors and stakeholders. | Casting a negative light were remarks by the Dutch finance minister, Jeroen Dijsselbloem, who heads the Eurogroup of finance ministers that helped forge the bailout pact. In an interview with Reuters, Mr. Dijsselbloem said the Cyprus bailout could be a new template for resolving regional banking problems by shifting more risk to depositors and stakeholders. |
| “What we’ve done last night is what I call pushing back the risks,” Mr. Dijsselbloem said, according to Reuters. | “What we’ve done last night is what I call pushing back the risks,” Mr. Dijsselbloem said, according to Reuters. |
| Later Monday, on the Web site for the euro area, Mr. Dijisselbloem insisted that bailout programs like the one for Cyprus “are tailor-made to the situation of the country concerned and no models or templates are used.” | |
| Of the 17 euro zone members, Cyprus, Greece, Ireland and Portugal have all received bailouts since the sovereign debt crisis began. The deal announced Monday marked the first time that junior and senior bondholders, as well as large depositors, have been required to bear part of the pain – possibly setting a precedent for any future bailouts. | Of the 17 euro zone members, Cyprus, Greece, Ireland and Portugal have all received bailouts since the sovereign debt crisis began. The deal announced Monday marked the first time that junior and senior bondholders, as well as large depositors, have been required to bear part of the pain – possibly setting a precedent for any future bailouts. |
| Yields, or interest rates, on Italian and Spanish government debt, had started that day down, but later rose. That movement, indicating an increase in the governments’ borrowing costs, were a sign that investors may be nervous that Cyprus’s problems could have a contagion effect in other financially challenged euro zone countries. | Yields, or interest rates, on Italian and Spanish government debt, had started that day down, but later rose. That movement, indicating an increase in the governments’ borrowing costs, were a sign that investors may be nervous that Cyprus’s problems could have a contagion effect in other financially challenged euro zone countries. |
| European stock markets closed down for the day. The Euro Stoxx 50, a benchmark of euro zone blue chips, ended off 1.2 percent, while the main French index, the CAC 40, was down more than 1 percent. The German DAX was down 0.5 percent. | European stock markets closed down for the day. The Euro Stoxx 50, a benchmark of euro zone blue chips, ended off 1.2 percent, while the main French index, the CAC 40, was down more than 1 percent. The German DAX was down 0.5 percent. |
| U.S. stocks, which had opened moderately higher, also gave back those gains. | U.S. stocks, which had opened moderately higher, also gave back those gains. |
| Cypriot markets were closed Monday for a public holiday, leaving officials just one day to nail down critical details before banks were to reopen Tuesday. | Cypriot markets were closed Monday for a public holiday, leaving officials just one day to nail down critical details before banks were to reopen Tuesday. |
| Late in the European day on Monday, Cypriot officials said that while most of the country’s banks would reopen on Tuesday for the first time in more than a week, the two biggest ones — which are most subject to the terms of the bailout deal — would not remain closed until Thursday. That was a further sign that kinks still needed to be worked out in the plan to prop up those institutions. | Late in the European day on Monday, Cypriot officials said that while most of the country’s banks would reopen on Tuesday for the first time in more than a week, the two biggest ones — which are most subject to the terms of the bailout deal — would not remain closed until Thursday. That was a further sign that kinks still needed to be worked out in the plan to prop up those institutions. |
| The bailout deal will eventually lead to Laiki Bank, a troubled lender, being shut down, with its “good” assets being absorbed by Bank of Cyprus, the nation’s largest. Junior and senior bondholders would take losses, as would depositors in the bank with accounts holding more than €100,000. Foreign depositors, including Russians and Britons, hold an outsized share of the uninsured deposits. | The bailout deal will eventually lead to Laiki Bank, a troubled lender, being shut down, with its “good” assets being absorbed by Bank of Cyprus, the nation’s largest. Junior and senior bondholders would take losses, as would depositors in the bank with accounts holding more than €100,000. Foreign depositors, including Russians and Britons, hold an outsized share of the uninsured deposits. |
| Accounts of less than €100,000 would be protected. Outrage over the original bailout plan, which would have included a hit on insured deposits, contributed to Parliament’s rejection of the deal and caused fears across Europe that the conditions for bank runs were being created by short-sighted policy. | Accounts of less than €100,000 would be protected. Outrage over the original bailout plan, which would have included a hit on insured deposits, contributed to Parliament’s rejection of the deal and caused fears across Europe that the conditions for bank runs were being created by short-sighted policy. |
| The agreement ensures, crucially, that the European Central Bank will continue providing funding to Cypriot banks. The E.C.B. had turned up the pressure last week, setting a Monday deadline for a deal and saying it would no longer provide the low-interest loans on which the island’s banks depend if a deal were not reached. The accord early Monday should remove any possibility of a near-term catastrophe. | The agreement ensures, crucially, that the European Central Bank will continue providing funding to Cypriot banks. The E.C.B. had turned up the pressure last week, setting a Monday deadline for a deal and saying it would no longer provide the low-interest loans on which the island’s banks depend if a deal were not reached. The accord early Monday should remove any possibility of a near-term catastrophe. |
| European finance ministers said in a statement that the program would address the exceptional challenges that Cyprus is facing and restore the viability of the financial sector, with the view of “restoring sustainable growth and sound public finances over the coming years.” | European finance ministers said in a statement that the program would address the exceptional challenges that Cyprus is facing and restore the viability of the financial sector, with the view of “restoring sustainable growth and sound public finances over the coming years.” |
| Chancellor Angela Merkel of Germany made an unusually lengthy statement on Monday in which she sought to reassure the Cypriot people by underlining the agreement’s aim to protect smaller savers and provide Cyprus with a stable future. | Chancellor Angela Merkel of Germany made an unusually lengthy statement on Monday in which she sought to reassure the Cypriot people by underlining the agreement’s aim to protect smaller savers and provide Cyprus with a stable future. |
| “I think that we were able to achieve a fair division of the burden,” Ms. Merkel said. “We have always said that we do not want taxpayers to save the banks, but the banks must save themselves.” | “I think that we were able to achieve a fair division of the burden,” Ms. Merkel said. “We have always said that we do not want taxpayers to save the banks, but the banks must save themselves.” |
| Ms. Merkel pledged that Cyprus’s European partners would support the country through loans worth €10 billion in the coming years. “That means that the I.M.F. and European taxpayers are helping Cyprus to start down a new path,” the chancellor said. | Ms. Merkel pledged that Cyprus’s European partners would support the country through loans worth €10 billion in the coming years. “That means that the I.M.F. and European taxpayers are helping Cyprus to start down a new path,” the chancellor said. |
| Whether the soothing words from Berlin would be enough to convince Cypriots, and citizens of other smaller and beleaguered European countries, that German leaders actually have their best interest at heart remains to be seen. Experts have argued in recent days that an overall loss of trust in those leaders previously seen to be managing the crisis could remain a troubling element of collateral damage resulting from the mishandling of the first rescue package for Cyprus. | Whether the soothing words from Berlin would be enough to convince Cypriots, and citizens of other smaller and beleaguered European countries, that German leaders actually have their best interest at heart remains to be seen. Experts have argued in recent days that an overall loss of trust in those leaders previously seen to be managing the crisis could remain a troubling element of collateral damage resulting from the mishandling of the first rescue package for Cyprus. |
| The German finance minister, Wolfgang Schäuble, looking as exhausted as he did relieved, said Monday the deal encompassed everything that Germany had “believed was right all along,” naming the restructuring of Cyprus’ banks, introduction of standards against money laundering and increased transparency. | The German finance minister, Wolfgang Schäuble, looking as exhausted as he did relieved, said Monday the deal encompassed everything that Germany had “believed was right all along,” naming the restructuring of Cyprus’ banks, introduction of standards against money laundering and increased transparency. |
| “I think it is a good result,” Mr. Schäuble told reporters in Berlin. He described the talks as long, difficult and intense, but praised the resulting agreement as fair to all parties involved. | “I think it is a good result,” Mr. Schäuble told reporters in Berlin. He described the talks as long, difficult and intense, but praised the resulting agreement as fair to all parties involved. |
| Senior officials in Russia, however, responded with sharply critical assessments of the agreement. | Senior officials in Russia, however, responded with sharply critical assessments of the agreement. |
| “They keep stealing from the thieves, it seems to me,” Prime Minister Dmitri A. Medvedev said, in comments carried by the Interfax news agency that were a paraphrasing of a Russian revolution-era slogan used to describe expropriating the wealth of the rich. | “They keep stealing from the thieves, it seems to me,” Prime Minister Dmitri A. Medvedev said, in comments carried by the Interfax news agency that were a paraphrasing of a Russian revolution-era slogan used to describe expropriating the wealth of the rich. |
| Mr. Medvedev, speaking in a meeting with a deputy prime minister, Igor Shuvalov, said the consequences of imposing losses on depositors should be studied carefully. | Mr. Medvedev, speaking in a meeting with a deputy prime minister, Igor Shuvalov, said the consequences of imposing losses on depositors should be studied carefully. |
| The restructuring of the two largest Cypriot banks may well cost Russian depositors more than the bank tax would have. The exact loss will not be known for some time. Estimates, though, range from 30 percent to 60 percent of the value of large deposits in the most wobbly of the two banks, Cyprus Popular Bank. | The restructuring of the two largest Cypriot banks may well cost Russian depositors more than the bank tax would have. The exact loss will not be known for some time. Estimates, though, range from 30 percent to 60 percent of the value of large deposits in the most wobbly of the two banks, Cyprus Popular Bank. |
| Mr. Shuvalov, the deputy prime minister, saw a silver lining in the losses, saying the crisis would encourage Russians to keep money at home. “It is a signal,” he said, to bring money home. “We have very stable banks,” he said, Interfax reported. | Mr. Shuvalov, the deputy prime minister, saw a silver lining in the losses, saying the crisis would encourage Russians to keep money at home. “It is a signal,” he said, to bring money home. “We have very stable banks,” he said, Interfax reported. |
| There were mixed reactions in Greece, with the fragile coalition government issuing cautious messages of solidarity with the Cypriot government and the president, who has significant influence but limited executive powers, criticizing the European Union for its tough treatment of Nicosia. | There were mixed reactions in Greece, with the fragile coalition government issuing cautious messages of solidarity with the Cypriot government and the president, who has significant influence but limited executive powers, criticizing the European Union for its tough treatment of Nicosia. |
| Greece’s government spokesman, Simos Kedikoglou, indicated that the agreement was a necessary evil. “It is painful, but it averts the descent into chaos that a disorderly default and an exit from the euro zone would have brought,” he said, noting that the focus now should be on “helping Cyprus stand back on its feet.” | Greece’s government spokesman, Simos Kedikoglou, indicated that the agreement was a necessary evil. “It is painful, but it averts the descent into chaos that a disorderly default and an exit from the euro zone would have brought,” he said, noting that the focus now should be on “helping Cyprus stand back on its feet.” |
| President Karolos Papoulias, speaking at a military parade in Athens to mark the 192nd anniversary of Greece’s independence from Turkish rule, said the Cyprus bailout was “unacceptable because it is selective.” | President Karolos Papoulias, speaking at a military parade in Athens to mark the 192nd anniversary of Greece’s independence from Turkish rule, said the Cyprus bailout was “unacceptable because it is selective.” |
| “The European Union must not choose its victims,” he said, “because it is dashing the dreams of European people that the E.U. can provide a shelter for the weak.” He added that he hoped this message was “received in all major capitals, and especially in Berlin.” | “The European Union must not choose its victims,” he said, “because it is dashing the dreams of European people that the E.U. can provide a shelter for the weak.” He added that he hoped this message was “received in all major capitals, and especially in Berlin.” |
| Melissa Eddy in Berlin, Andrew E. Kramer in Moscow and Niki Kitsantonis in Athens contributed reporting. | Melissa Eddy in Berlin, Andrew E. Kramer in Moscow and Niki Kitsantonis in Athens contributed reporting. |