Greek Cypriot administration of southern Cyprus agreed with the EU and the IMF on the new bailout package on early Monday.
Following a 10-hour-long meeting in Brussels with head of the EU Council Herman Van Rompuy, head of the EU Commission Jose Manuel Barroso, IMF chief Christine Lagarde, head of the Euro Group Jeroen Dijsselbloem and president of the European Central Bank Mario Draghi, leader of the Greek Cypriot administration Nicos Anastasiadis accepted the new package.
The package keeps Greek Cypriots in the Euro zone but would prune the size of oversize banking sector. Parliamentary approval will not be needed for the new package.
Diplomatic sources said Anastasiadis tried to resist IMF's demands on restructuring banking sector, and threatened to resign and go to referendum, but at the end seeing that the EU leaders were not backing him, he had to step back and agree on the new package.
Sources said that Van Rompuy and Barroso persuaded Anastasiadis by saying "either agree restructuring banking sector or leave the Euro zone".
The new package, that was framed at the 10-hour-long meeting, was detailed later by the finance ministers of the Euro zone.
Contrary to the first package that was rejected by the Greek Cypriot parliament last week, deposits under 100,000 Euros will not be affected and there won't be a regulation for the sector for the deposits over 100,000 Euros.
Under the agreement, Laiki Bank, one of largest bank of Greek Cypriots, would be wound down and senior bondholders would take losses. Depositors in the bank with accounts holding more than 100,000 euros would also be heavily penalized but the exact amount of those losses would need to be determined.
The plan to resolve Laiki Bank should allow the Bank of Cyprus, the largest lender, to survive. But the Bank of Cyprus will take on some of Laiki's liabilities in the form of emergency liquidity, which has been drip-fed to Laiki by the European Central Bank (ECB). That short-term financing, which the ECB had threatened to cut off on Monday, is expected to continue. Depositors in the Bank of Cyprus are likely to face forced losses rather than any form of tax.
Head of the Euro Group Jeroen Dijsselbloom stated that with the new package, banking sector of Greek Cypriots would be accorded with the EU average as of 2018.
Dijsselbloem said he did not know when the banks, that were closed for the last 10 days, would be reopened in southern Cyprus.
- New limitations fixed for cash machines in the Greek Cypriot administration -
After the agreement between Greek Cypriot administration and officials from the Troika of the EU and the IMF, a limitation for cash machines was accepted.
After the bailout plan was accepted, the National Bank Laiki Trapeza lowered the limit for cash machines from 260 euro to 100 euro.
Banks in the Greek Cypriot administration have been closed for ten days, creating big distress.
While the leader of the Greek Cypriot administration Nicos Anastasiades and officials from the Troika of the EU and the IMF met, the communist party AKEL organized protests in front of the parliament where 1,000 people took part and marched to the European Union House.
They held posters with slogans "Troika go home", "We won't be 21st century slaves" and "That is our money, that is our life".
In Polemidhia city near to Limassol, a Cypriot bank office was attacked by unknown assailants with a hand-made bomb Sunday night.