* 10 bln bailout talks concluded, aid to flow in May *
Finance Minister Michalis Sarris resigned on Tuesday, just 33 days after being sworn in and having concluded a 10 bln euro bailout deal with international lenders. He will be replaced by Labour and Social Insurance Minister Haris Georgiades, a close associate of President Nicos Anastasiades.
The bailout, to be approved by EU national parliaments and eurozone finance ministers, was conditional to a radical restructuring of the island’s banking sector that saw second largest lender Popular Laiki Bank collapse under extreme liquidity difficulties and absorbed by Bank of Cyprus. As a result, Laiki clients saw most of their deposits vanish into thin air, while Bank of Cyprus clients with savings of over 100,000 euros, will contribute in a ‘bail in’ of up to 60% of their deposits in exchange for an equity stake.
Sarris, a lead player in talks with IMF and EU negotiators, said he had completed his task but also that he was likely to come under scrutiny in an investigation into the crisis.
Tuesday's deal will see Cyprus receiving a 10 bln euro loan, carrying an interest rate of 2.5%. It is repayable over a 12 year period after a grace period of a decade.
"This is a very important development which ends a very long period of uncertainty," said government spokesman Christos Stylianides. Sarris said he expected the first disbursement of aid in May.
Compared with a previous draft deal with lenders brokered in November, Tuesday's agreement gave authorities additional room to reach a primary surplus by 2018, longer than an initial 2016, Stylianides said.
When banks reopened after a two-week lockdown last week, Cypriots were faced with currency controls to prevent a run on banks, unprecedented in the history of the 17-member euro zone. In the event, there was no run.
PROBE
President Anastasiades appointed three judges on Tuesday to head an inquiry into possible political and regulatory failures in the island's economic demise, as well as the role of banks.
Sarris, who was dispatched to Moscow last month but returned empty-handed as Cyprus sought additional Russian aid after parliament rejected a universal European bank levy proposal, said his main goal of agreeing a deal with lenders had been accomplished.
But he said it was also appropriate to resign since his previous role as chairman of Laiki was also likely to come under scrutiny.
"I believe that in order to facilitate the work of the investigators, the right thing would be to resign, which I did," said Sarris.
Anastasiades said nobody would be exempt from the probe, starting with the legal business he once headed, and family connections.
A list of business which had moved money out of Popular in the run-up to the bailout deal included a company in Limassol, whose owners are related to Anastasiades by marriage.
The list, produced in the Communist party newspaper Haravghi on Sunday and reproduced by other media, said the company, A. Loutsios and Sons, had moved some 21 mln euros out of the bank.
The company, which is major importer of cars, said it had moved 10.5 mln euros to Barclays Bank Plc in Britain, and the remaining amount to Bank of Cyprus in order to complete real estate transactions.
CAPITAL CONTROLS
The previous Communist administration first sought aid from the "Troika" of IMF, EU and European Commission last year. That government was severely criticised for passing the buck onto the incumbent conservatives knowing full well they could not win general elections held last February.
"Unquestionably, the deal with the Troika should have been completed earlier," said Stylianides.
Cyprus earlier announced a partial relaxation of currency controls, raising the ceiling for financial transactions that do not require central bank approval, but keeping most other restrictions in place.
Before resigning, Sarris said it was not clear when the remaining capital controls would be lifted.
A finance ministry decree on Tuesday, the third since controls were first introduced, raised the ceiling on transactions which do not require central bank approval to 25,000 euros from 5,000 euros. It also permits the use of cheques worth up to 9,000 euros per month.
Other restrictions introduced last week, including a 300 euro per day cash withdrawal limit and a 1,000 euro limit on the amount travellers can take overseas, remain in place.
In a deal brokered early on Tuesday morning, it was also agreed that a small portion of the remaining 40% in uninsured deposits of over 100,000 euros at the Bank of Cyprus effectively frozen under the arrangement, 10% be unblocked.
