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BRUSSELS (Reuters) - Euro zone ministers struck a deal on Saturday to hand Cyprus a bailout worth 10 billion euros (8.5 billion pounds) to stave off bankruptcy. Under the programme, the island's debt should fall to 100 percent of economic output by 2020.
Here are the outlines of the financial package:
- Nicosia was to impose a 9.9 percent one-off levy on deposits held in Cyprus above 100,000 euros and a levy of 6.75 percent on smaller deposits from March 19. The levy will generate 5.8 billion euros.
- Depositors may be compensated with equity in the banks. Cyprus will decide if they should.
- There will also be a tax on interest that the deposits generate, which will likely be set at 20-30 percent.
- Junior bondholders of Cypriot banks that will need to be recapitalised will lose their money - 1.4 billion euros. Senior bondholders in banks, who hold around 200 million euros worth of paper, will not be hurt.
- Cyprus has agreed to increase its nominal corporate tax rate by 2.5 percentage points to 12.5 percent, which could bring in up to 200 million euros a year.
- The International Monetary Fund is expected to contribute to the rescue package, but the amount is still to be determined.
- Russia will likely help finance the programme by extending a 2.5 billion euro loan already made to Cyprus by five years to 2021 and reducing the interest rate, which is now at 4.5 percent.
- Cyprus may be required to privatise the Cypriot telecoms company, the electricity company and the ports authority. Privatisation is to contribute 1.4 billion euros of revenues to the bailout effort, sources say.
- Cyprus will have to downsize its banking sector, reducing it to the EU average by 2018. The size of the banking sector in Cyprus is more than eight times the size of the economy, compared to around 3.5 times in the EU.
(Reporting by Robin Emmott, Jan Strupczewski and Annika Breidthardt)