Cyprus sacrifices top banks for bailout

A preliminary agreement has been reached paving the way for Cyprus to receive a $A12.49b bailout. Source: AAP

THE Cyprus bailout deal concluded in Brussels has ended uncertainty and prevented a "disorderly default" that could have seen Cyprus exit the eurozone, a Cypriot government spokesman says.

"Finally, Cyprus has ended a period of uncertainty and insecurity for the economy. A disorderly default was avoided, which would have meant leaving the euro zone, with devastating consequences," spokesman Christos Stylianides said in a statement.

"A disorderly default was avoided, which would have meant leaving the eurozone, with devastating consequences."

Early on Monday, the eurozone struck a deal with Cyprus to resurrect a bailout for its government, but only after a radical downsizing of the island's financial sector.

Under the terms of the agreement the island's second largest lender Laiki (Popular Bank) will be wound up while the Bank of Cyprus, the island's No.1 lender, will have to endure a major "haircut" on all deposits of more than 100,000 euros ($A124,900).

"The important thing is that we have reached an agreement that allows us to kick-start the economy and lay the groundwork for a new beginning," Stylianides said.

"Without doubt that there are painful aspects that will place a burden on all of us."

Diko MP and chair of parliamentary finance committee, Nicolas Papadopoulos, too spoke of the pain the deal will deliver to Cypriots.

"Without a shadow of a doubt the eurogroup deal and bailout agreement with the troika is a very painful one," he said.

Former Cyprus central bank governor Afxentis Afxentiou told state radio:

"Cyprus has suffered a big hit and our standard of living will spiral downward, although the economy maybe able to recover in 2-3 years our standard of living will take at least 10 years to return."

Cyprus President Nicos Anastasiades, meanwhile, sent a tweet in which he expressed gratitude to Cypriots.

"Thank you for your messages of support. They gave me strength during last night's struggle to secure the best possible outcome for #Cyprus," said the tweet.

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