Foreigners hardest hit by the South’s haircut

Foreigners with deposits in Bank of Cyprus have been the hardest hit by the EU bailout, according to an annual report by Central Bank Governor, Panicos Demetriades.

“70% of the value of deposits concerned overseas residents, leaving Cypriot households and businesses unaffected to a greater extent than might have been expected,”  Panicos said.

The once thriving financial sector, now damaged following the levy on deposits of over 100,000 euro  has been shouldered mainly by foreign investors, many of whom are Russian.

The Central Bank governor said that it was still necessary to keep capital controls in place until trust in the banking system is restored.

In March, a 10 billion euro bailout agreement was reached with Eurozone finance ministers in order to avoid the complete collapse of South Cyprus’ banking system and to keep the country within the Eurozone.

On Wednesday evening,  Olli Rehn, the Vice President of the European Commission, told an economics committee in the European parliament that Cyprus was warned about its “excessive economic imbalances” and was told that financial assistance was “unavoidable” months before it requested aid.

Cyprus was censured by top EU officials for dragging its feet over a bailout from as early as November 2011 when the first warnings were issued, to the sealing of a deal some 16 months later, a time-frame  which had only made things worse, they said.

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