Cyprus reaches deal for a 10 billion-euro bailout

Cyprus reaches deal for a 10 billion-euro bailoutThe authorities in Cyprus have reached a deal for a 10 billion-euro bailout package with its creditors just in time to avoid a devastating disorderly default on payments.

As the government reached a deal to avoid the default, investors expressed their confidence in the banking sector. The shares of European banks gained soon after the deal was announced between the Cypriot government and its creditors. The authorities have agreed to shut down the second-biggest bank in Cyprus, the Cyprus Popular Bank. Accountholders with less than 100,000 euros in their accounts will not suffer losses due to the close of the bank.

The Stoxx 600 Banks Index recorded an increase of 1.1 per cent to 168.85 this morning in Frankfurt. Credit Agricole rose 2.9 per cent to 6.75 euros and BNP Paribas rose 2.4 per cent to 42.2 euros. The banking sector shares had fallen significantly across Europe in the previous week because the deal in Cyprus proposed taxing accountholders and this led to reduced sentiments towards banks by savers. The shares also fell after the government of Cyprus failed to agree a deal backed by the European Union and International Monetary Fund.