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For the last week there has been uncertainty about the future of Cyprus and their place in the Eurozone. Consumers have been unable to draw more than 100 Euros a day as the government has been eyeing their savings and investments.

At the last minute Cyprus secured a €10 billion package of rescue loans which looks set to save the country from a banking system collapse and bankruptcy that could have destabilized the entire euro area.

Euro saved by the bell

In return for the bailout, Cyprus must drastically shrink its outsized banking sector, cut its budget, implement structural reforms and privatize state assets. Without a bailout deal by today the tiny nation of about 800,000 would have faced the prospect of bankruptcy, which could have forced it to become the first country to abandon the euro currency. That would have upset markets further and spurred turmoil across the entire eurozone.

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 privatization or government assets.The international creditors, led by the IMF, were seeking a fundamental restructuring of the country’s outsized financial system, which is worth up to eight times the Cypriot gross domestic product of about €18 billion. They said the country’s business model of attracting foreign investors, among them many Russians, with low taxes and lax financial regulation that had backfired and now needed to be upended.

Banks will fall and heads will roll.

Despite the loan and these steps the country’s second-largest bank will be shut down immediately, with all bond holders and people with more than €100,000 in their bank accounts there facing significant losses. Amounts less than €100,000 are safe but those accounts higher than this face projected losses of around 40%. Savers’ deposits with all Cypriot banks of up to €100,000 are guaranteed by the state in accordance with the EU’s deposit insurance guarantee and will be moved to the countries largest bank in the near future as the countries second largest bank is dismantled and restructured.

“It’s not that we won a battle, but we really have avoided a disastrous exit from the eurozone,” said Cyprus’ Finance Minister Michalis Sarris. “A long period of uncertainty and insecurity surrounding the Cyprus economy has ended.”

The measures are likely to deepen the recession in Cyprus and lead to more job losses. Anaylists say that Cyprus will now reach a debt level of about 100 per cent of their GDP by 2020.