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TheStreet Open House

Bank of Cyprus' Big Savers to Lose up to 60%

Clerides accused some of the 17 European countries that use the euro of wanting to see the end of Cyprus as an international financial services center and to send the message that European taxpayers will no longer shoulder the burden of bailing out problem banks.

But German Finance Minister Wolfgang Schaeuble challenged that notion, insisting in an interview with the Bild daily published Saturday that "Cyprus is and remains a special, isolated case" and doesn't point the way for future European rescue programs.

Europe has demanded that big depositors in Cyprus' two largest banks -- Bank of Cyprus and Laiki Bank -- accept across-the-board losses in order to pay for the nation's 16 billion euro ($20.5 billion) bailout. All deposits of up to 100,000 are safe, meaning that a saver with 500,000 euros in the bank will only suffer losses on the remaining 400,000 euros.

Cypriot officials had previously said that large savers at Laiki -- which will be absorbed in to the Bank of Cyprus -- could lose as much as 80%. But they had said large accounts at the Bank of Cyprus would lose only 30% to 40%.

Asked about Saturday's announcement, University of Cyprus political scientist Antonis Ellinas predicted that unemployment, currently at 15%, will "probably go through the roof" over the next few years.

"It means that (people) ... have to accept a major haircut to their way of life and their standard of living. The social impact is yet to be realized, but they will be enormous in terms of social unrest and radical social phenomenon," Ellinas said.

There's also concern that large depositors -- including many wealthy Russians -- will take their money and run once capital restrictions that Cypriot authorities have imposed on bank transactions to prevent such a possibility are lifted in about a month.

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