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| Stock markets rise as Cyprus deal eases crisis fears | Stock markets rise as Cyprus deal eases crisis fears |
| (35 minutes later) | |
| European stock markets have risen after officials agreed a bailout deal for Cyprus following a week of uncertainty. | European stock markets have risen after officials agreed a bailout deal for Cyprus following a week of uncertainty. |
| The main markets in France and Germany were both up by about 1.5% in the first hours of trading. The euro was also up against other major currencies. | The main markets in France and Germany were both up by about 1.5% in the first hours of trading. The euro was also up against other major currencies. |
| The rises followed a rally in Asian shares earlier in the day. | The rises followed a rally in Asian shares earlier in the day. |
| Investors are hopeful that the deal struck between Cyprus, European authorities and the IMF will prevent the crisis escalating further. | Investors are hopeful that the deal struck between Cyprus, European authorities and the IMF will prevent the crisis escalating further. |
| Cyprus will now get 10bn euros ($13bn; £8.5bn) in bailout funds to keep its banking system running and prevent it from being forced out of the eurozone. | Cyprus will now get 10bn euros ($13bn; £8.5bn) in bailout funds to keep its banking system running and prevent it from being forced out of the eurozone. |
| The European Central Bank (ECB) had set a deadline of Monday to agree a deal. If this was not met, it would have cut crucial funding to Cyprus's two biggest banks. | The European Central Bank (ECB) had set a deadline of Monday to agree a deal. If this was not met, it would have cut crucial funding to Cyprus's two biggest banks. |
| "We've put an end to the uncertainty that has affected Cyprus and the euro in recent days," said Dutch finance minister Jeroen Dijsselbloem, who chaired the key meeting of European finance ministers on Sunday night. | "We've put an end to the uncertainty that has affected Cyprus and the euro in recent days," said Dutch finance minister Jeroen Dijsselbloem, who chaired the key meeting of European finance ministers on Sunday night. |
| In Paris on Monday, the Cac 40 share index was up 1.7%, while Frankfurt's Dax index rose 1.3%. London's FTSE 100 index was also up in early trading. | In Paris on Monday, the Cac 40 share index was up 1.7%, while Frankfurt's Dax index rose 1.3%. London's FTSE 100 index was also up in early trading. |
| In Asia, stock markets in Japan, South Korea, Hong Kong and Australia closed up by between 0.5% and 1.7%. | In Asia, stock markets in Japan, South Korea, Hong Kong and Australia closed up by between 0.5% and 1.7%. |
| Currency boost | Currency boost |
| Investors were particularly encouraged by the fact that the the new deal, unlike previous agreements, does not require the approval of the Cypriot parliament. | Investors were particularly encouraged by the fact that the the new deal, unlike previous agreements, does not require the approval of the Cypriot parliament. |
| The uncertainty about the future of Cyprus in the euro was sparked when parliament rejected an original deal, which included a controversial bank levy, a week ago. | The uncertainty about the future of Cyprus in the euro was sparked when parliament rejected an original deal, which included a controversial bank levy, a week ago. |
| Despite the Cypriot economy's relatively small size, many analysts had been concerned that the crisis would spread to the wider eurozone. | Despite the Cypriot economy's relatively small size, many analysts had been concerned that the crisis would spread to the wider eurozone. |
| There were fears the country's possible exit from the euro would trigger a loss of confidence across the single currency bloc, and prompt investors to withdraw from other troubled economies, such as Greece. | There were fears the country's possible exit from the euro would trigger a loss of confidence across the single currency bloc, and prompt investors to withdraw from other troubled economies, such as Greece. |
| News of the new agreement saw investors return to the euro, after it saw falls last week. | News of the new agreement saw investors return to the euro, after it saw falls last week. |
| The currency rose sharply against the dollar, the pound and the yen following the announcement, before falling back slightly. | The currency rose sharply against the dollar, the pound and the yen following the announcement, before falling back slightly. |
| "This will likely limit the euro's downside, with those who shorted the euro covering their positions, and improve general risk sentiment," said Hiroshi Maeba, head of foreign exchange trading for UBS in Tokyo. | "This will likely limit the euro's downside, with those who shorted the euro covering their positions, and improve general risk sentiment," said Hiroshi Maeba, head of foreign exchange trading for UBS in Tokyo. |
| Uncertainties remain | Uncertainties remain |
| Despite the relief on the markets, analysts warn that significant obstacles remain as Cyprus attempts to recover from the crisis. | |
| The EU-IMF deal involves massive restructuring of the Cypriot banking system, as well as austerity measures and tax increases. | The EU-IMF deal involves massive restructuring of the Cypriot banking system, as well as austerity measures and tax increases. |
| There has also been significant public anger in Cyprus at the intervention of European authorities, and the credibility of the Cypriot government has been questioned. | There has also been significant public anger in Cyprus at the intervention of European authorities, and the credibility of the Cypriot government has been questioned. |
| The bank restructuring is also likely to mean that depositors with more than 100,000 euros are likely to lose a significant proportion of their money - possibly as much as 30-40%. | The bank restructuring is also likely to mean that depositors with more than 100,000 euros are likely to lose a significant proportion of their money - possibly as much as 30-40%. |
| "We see a risk that Cyprus' sovereign debt burden post-bailout might not be sustainable, as the country is likely to enter a deep recession caused by the shrinkage of the banking sector and severe deleveraging," warned Reinhard Cluse, an economist at UBS. | "We see a risk that Cyprus' sovereign debt burden post-bailout might not be sustainable, as the country is likely to enter a deep recession caused by the shrinkage of the banking sector and severe deleveraging," warned Reinhard Cluse, an economist at UBS. |