The drastic shrinking of the financial sector, the wiping out of wealth through the losses on deposits, the loss of confidence with the recent turmoil and the upcoming austerity measures all mean that Cyprus is facing tough times.
"The near future will be very difficult for the country and its people," acknowledged the EU Commission's top economic official, Olli Rehn. "But (the measures) will be necessary for the Cypriot people to rebuild their economy on a new basis."
Cypriot banks have been closed this past week while officials worked on a rescue plan, and they are not due to reopen until Tuesday. Cash has been available through ATMs, but long lines formed and many machines have quickly run out of cash.
Amid fears of a banking collapse, Cyprus' central bank on Sunday imposed a daily withdrawal limit of 100 euros ($130) from ATMs of the country's two largest banks to prevent a bank run by depositors worried about their savings.
The Cypriot government also approved a set of laws over the past week to introduce capital controls, in order to avoid a huge depositor flight once banks reopen.
To secure the rescue loan package, the Cypriot government had to find ways to raise several billion euros on its own. The bulk of that money is now being raised by forcing losses on large deposit holders, with the remainder coming from tax increases and privatizations.
The creditors had insisted that Cyprus couldn't receive more loans because that would make its debt burden unsustainably high. The IMF's Lagarde said Cyprus would now reach a debt level of about 100 percent of GDP by 2020.
A plan agreed to in marathon negotiations earlier this month called for a one-time levy on all bank depositors in Cypriot banks. But the proposal ignited fierce anger because it also targeted small savers. It failed to win a single vote in the Cypriot Parliament.
Cyprus' bid to secure more financial aid from its long-time ally, Russia, then failed, forcing it to turn again to its European partners. Russia was expected, however, to extend a 2.5 billion euro emergency loan granted last year, also lowering the interest rate due and extending then repayment schedule.
Associated Press writers Elena Becatoros and Menelaos Hadjicostis in Nicosia, Cyprus, contributed to this story.
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