Cyprus girds for run on banks after sealing bailout

The president of Cyprus assured his people a bailout deal he struck with the European Union was in their best interests and would end anxiety, but he also announced “very temporary” capital controls to stem a run on the island’s banks.

Returning on Monday from fraught overnight negotiations in Brussels, President Nicos Anastasiades said the 10-billion euro (US$13 billion) rescue plan agreed there in the early hours of the morning was “painful” but essential to avoid economic meltdown.

He has agreed to close down the second-largest bank, Cyprus Popular, and inflict heavy losses on big depositors, many of them Russian, after Cyprus’s outsize financial sector ran into trouble when its investments in neighbouring Greece went sour.

“The agreement we reached is difficult but, under the circumstances, the best that we could achieve,” Anastasiades said in a televised address to the nation on Monday evening.

“We leave behind the uncertainty and anxiety that we all lived through over the last few months and we look forward now to the future with optimism,” he told compatriots who face an immediate deep recession and years of economic hardship.