Cyprus President Nicos Anastasiades says the terms of his country's new $13 billion bailout are "painful," but that he had to agree to the deal with international lenders to keep the island nation from economic collapse.
In a televised speech to his country Monday night, Mr. Anastasiades said, "Our choices were not easy."
He said that at banks on the Mediterranean island, capital restrictions will be imposed to prevent depositors from making massive cash withdrawals. But he said the restrictions would be "very temporary."
Most of those banks were due to reopen Tuesday, but now all will remain closed until Thursday. Banks in Cyprus have been closed for more than a week during the crisis and the size of withdrawals by customers at automated teller machines has been limited.
In securing the rescue package, Cyprus avoided bankruptcy and an exit from the euro currency union. But the impact of the deal is drawing widely different interpretations.
Wealthy Russian investors have parked vast sums in Cypriot banks. But Russian Prime Minister Dmitry Medvedev said Monday that Cyprus, by agreeing to impose a tax of about 30 percent on big, uninsured accounts with more than $130,000, is "continuing, I think, to plunder the loot" of his countrymen.
German Chancellor Angela Merkel, Europe's chief advocate for forcing debt-ridden countries to resolve their financial woes, described the Cyprus rescue plan as fair.
"I am very pleased that a solution was found last night and that we have been able to avoid an insolvency. I believe that a fair burden distribution was achieved. On the one hand, banks have to take responsibility for themselves which is what we have always said. We do not want taxpayers to save banks. Banks must save themselves. This is what will happen in the case of Cyprus.''
The bailout terms were reached in last-minute negotiations in Brussels, just ahead of a deadline set by the European Central Bank. The central bank has said it would cut off emergency funding to Cypriot banks if no deal was reached. With the bailout secure, the bank said it would continue the emergency assistance.
Cypriot officials warned of tough times ahead for the country, whose economy accounts for just two-tenths of one percent of the eurozone's economic fortunes. Cypriot Finance Minister Michael Sarris predicted the Cypriot economy would recover. But he said the nation will be paying for the past mistakes of its bankers and the government, who together turned the island into a tax haven for offshore investors, with limited regulation.
"I don't think there is any denying that the Cyprus people will have to go through some tough times and will suffer the consequences of a protracted period where wrong decisions were made, primarily at the banking level, but also the fiscal excesses that we had to adjust over a relatively short period of time."
Greek Orthodox Archbishop Chrysostomos II said there "will be a lot of difficulties, some will lose their jobs, the poverty will increase."
To secure the $13 billion bailout from their European neighbors, the central bank and International Monetary Fund, Cyprus had to raise $7.5 billion. As part of the deal, it agreed to close the island's second largest bank, Laiki, and enforce heavy losses on wealthy bank depositors. The island last week rejected an earlier plan sanctioned by the lenders that also would have taxed the insured accounts of small investors.
If no deal had been reached, Cyprus would have defaulted, and likely been forced to leave the eurozone.
Cyprus becomes the fifth eurozone country where billions of dollars in bailouts have been needed to ward off bankruptcy, following Greece, Portugal, Ireland and Spain.