EU Officials: Cyprus, Lenders Reach Bailout Deal

European Union officials say Cyprus has reached a bailout deal with international lenders that will see the country's second biggest bank shut down.

Agreement was reached early Monday at last-minute talks in Brussels with the European Union, European Central Bank and International Monetary Fund.

The deal includes closing down Cyprus' Laiki bank and moving deposits of $130,000 or less to the stronger Bank of Cyprus. Accounts of more than $130,000 are not insured under EU regulations and will have to take losses, but the amount of the losses was not immediately clear.

Christine Lagarde, the International Monetary Fund chief, said Monday the bailout deal for Cyprus is "a comprehensive and credible plan" to deal with the island nation's economic challenges.  She says the plan addresses the "core problem of the banking system through a clear strategy ."

International creditors have said Cyprus' business model of attracting foreign investors, among them many Russians, with low taxes and lax financial regulation has backfired and must be replaced.

The bailout deal alleviates the possibility of a tax on all bank accounts, but depositors are still facing losses.

Eurozone head Jeroen Dijsselbloem said he is "convinced this is a much better deal" than the one to raid all savings accounts, which unraveled last week.

Without a deal, the tiny Mediterranean island would have faced the prospect of bankruptcy, which could have forced it to abandon the euro currency and forced its exit from the eurozone.  

Cyprus needs a $13 billion emergency bailout from its lenders to avoid bankruptcy.