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Cyprus Bank Closures Extended

Cyprus President Nicos Anastasiades says the international rescue plan is "painful" but essential.

Cyprus President Nicos Anastasiades says the international rescue plan is "painful" but essential.

Cyprus's Central Bank says all of the Mediterranean island’s banks will remain closed until March 28.

The announcement came hours after the Central Bank had said all banks except the country's two largest lenders, Laiki and Bank of Cyprus, would reopen on March 26.

In its announcement, the Central Bank said the decision was aimed at ensuring the "smooth functioning of the whole banking system."

Banks in Cyprus have been closed since March 16 to prevent massive withdrawals as the country's politicians struggled to agree on a plan to raise 5.8 billion euros ($7.5 billion) in order to qualify for a $10 billion international bailout.

A deal between Cyprus and lenders was announced early on March 25.

In a televised address, President Nicos Anastasiades said the rescue plan was "painful" but essential to avoid an economic meltdown.

He also said authorities would impose “temporary” limits on the kinds of transactions that customers could carry out with their money held in the banks. No details on the restrictions were given.

Anastasiades said that Cyprus had been close to “economic collapse” before the bailout deal with international lenders was reached.

The plan foresees Laiki bank and Bank of Cyprus absorbing major losses and Laiki being completely shut down.

Cyprus media reported the Bank of Cyprus Chairman Andreas Artemis resigned on March 26 over the conditions of the international bailout.

Later, a special administrator, Dinos Christofides, told Reuters he had been appointed late on March 25 by the Central Bank of Cyprus. He said he would oversee "the restructuring of the bank and the absorption of part of Cyprus Popular Bank," Reuters reported.

Holders of more than 100,000 euros in uninsured deposits in the two banks -- including, it is believed, many Russians -- will face a one-time tax of up to 40 percent of their deposits.

This is part of a plan to raise the 5.8 billion euros that the international lenders have demanded Cyprus contribute to its own bailout.

"The hours were difficult, at certain moments they were dramatic," Anastasiades said. "Cyprus found itself one breath before economic collapse. Our choices were not easy, nor was the environment ideal, but with hard negotiation, with persistence, but also with a sense of responsibility, we reached a result that secures the prospects of the country."

Russia has indicated it will support the bailout, with President Vladimir Putin ordering officials to restructure a 2.5 billion-euro loan that Moscow granted to Cyprus in 2011.

But Prime Minister Dmitry Medvedev criticized the rescue and plan for a hefty tax on major depositors, calling it “stealing.”

Some global markets and the value of the euro trended downward after the head of the Eurogroup, Dutch Finance Minister Jeroen Dijsselbloem, suggested on March 25 that the Cyprus deal could establish a framework for future bailouts in the eurozone.

His office later sought to clarify his comments, calling Cyprus "a specific case with exceptional challenges” that was not intended to be a model.

Based on reports from AP, Reuters, and AFP