Big depositors in Cyprus’s largest bank stand to lose far more than initially feared under a European Union rescue package to save the island from bankruptcy, a source with direct knowledge of the terms said on Friday.

Under conditions expected to be announced on Saturday, depositors in Bank of Cyprus will get shares in the bank worth 37.5 percent of their deposits over 100,000 euros, the source told Reuters, while the rest of their deposits may never be paid back.

The toughening of the terms will send a clear signal that the bailout means the end of Cyprus as a hub for offshore finance and could accelerate economic decline on the island and bring steeper job losses.

Officials had previously spoken of a loss to big depositors of 30 to 40 percent.

Cypriot President Nicos Anastasiades on Friday defended the 10-billion euro (USD 13 billion) bailout deal agreed with the EU five days ago, saying it had contained the risk of national bankruptcy.

“We have no intention of leaving the euro,” the conservative leader told a conference of civil servants in the capital, Nicosia.

“In no way will we experiment with the future of our country,” he said.

North Korea said today it had formally entered a “state of war” with South Korea and warned that any provocation would swiftly escalate into a nuclear conflict.

 “As of now, inter-Korea relations enter a state of war and all matters between the two Koreas will be handled according to wartime protocol,” the North said in a statement attributed to all government bodies and institutions.

It is the latest in a string of dire threats from Pyongyang that have been matched by tough warnings from South Korea and the United States, fuelling international concerns that the situation is spiralling out of control.

“The long-standing situation of the Korean peninsula being neither at peace nor at war is finally over,” said the statement carried by the official Korean Central News Agency (KCNA). The two Koreas have always technically remained at war because the 1950-53 Korean War concluded with an armistice rather than a peace treaty.

The North had announced earlier this month that it was ripping up the armistice and other bilateral peace pacts signed with Seoul in protest against South Korea-US joint military exercises. “This is not really a new threat – just part of a series of provocative threats,” the South’s Unification Ministry said in a statement.

The defence ministry added that no particular troop movement had been observed along the border. Voiding the ceasefire theoretically opened the way to a resumption of hostilities, although observers noted it was far from the first time that North Korea had announced the demise of the armistice.

India and Japan have agreed to promote their bilateral strategic and global partnership especially in economic and security areas, with Tokyo granting a USD 2.32 billion aid for infrastructure building.

“We hope to deepen and develop a strategic and global partnership (with India) by building a close cooperative relationship,” Japanese Foreign Minister Fumio Kishida said after meeting External Affairs Minister Salman Khurshid here.

During the meeting yesterday, Kishida unveiled a 220 billion yen (USD 2.32 billion) aid to India for infrastructure building and a 71-billion-yen loan (USD 753.17 million) for the subway project in India’s financial capital Mumbai, the Japanese news agency Kyodo reported.

Khurshid appreciated the aid, saying “Such assistance has been utilised in upgrading our infrastructure. The iconic Delhi Metro project has positively impacted the lives of millions of Indian citizens in the National Capital Region of Delhi.” The loan package consists of four projects, including a freight railway project connecting New Delhi and Mumbai, and a subway construction project in southern India.

Kyodo said the two leaders also agreed to further advance cooperation on a future high-speed railway project. “Our security cooperation is proceeding well. Earlier this year, we received the Chief of the Japanese Maritime Self Defence Force in India and your Defence Minister is expected to visit us later this year. The 1st Maritime Affairs Dialogue between India and Japan was held in January this year,” Khurshid said, noting that bilateral security cooperation is proceeding well.

The government Thursday released figures for fiscal spending and receipts, showing fiscal deficit for April-February at Rs 5.07 lakh crore, or 97.4 percent of the target for the current financial year.

Finance Minister P Chidambaram had set a target for fiscal deficit for FY13 at 5.3 percent of GDP, and said in the Budget that the goal would be achieved.

There has been criticism that the finance ministry had cut down sharply on Plan Expenditure to meet the fiscal deficit target, and that lower government spending would aggravate the slowdown.

The government spending in February was Rs 1.08 lakh crore, against Rs 1.05 lakh crore during the same month last year. However, fiscal deficit during the month fell sharply to Rs 41,680 crore, against Rs 58,600 crore in February last year.

The government collected Rs 66,060 crore in February by way of taxes (Rs 54,100 crore last year), and the revenue deficit during the month was Rs 43,900 crore (Rs 47,100 crore last year).

The RBI will announce the current account deficit for October-December later today.

Cyprus’s plan to impose capital controls threatens to test the ties that bind Europe’s monetary union and could see euros on the Mediterranean island valued differently to those in the rest of the bloc.

The capital controls, being imposed to avert a run on banks after an EU bailout, will limit foreign transactions and capital outflows but not movements of money within the country itself, the head of the Cyprus chamber of commerce said on Wednesday after meeting government officials.

The finance minister has said the controls could be in place for a few weeks although the experience of other countries, such as Iceland, suggest it may take much longer. Banks, shut since nearly two weeks, are due to reopen on Thursday.

The impact the restrictions have on the Cypriot economy depends on their exact nature and whether they are applied to payments as well as capital transfers. A report from Greek newspaper Kathimerini suggested there would be restrictions to both, and that these would initially last for seven days.

Restrictions on payments would be a far bigger incursion into the functioning of Europe’s internal market than controls on capital transfers, as euros held in banks in Cyprus could not be used to pay for goods and services elsewhere in the bloc.

By definition, that would make them less liquid than French or German euros and de facto, worth less.

India’s current account deficit (CAD) for the quarter ended December is expected to come at an all time high of 6.4 percent against 5.4 percent in the July-Sept period, The Reserve Bank of India will announce CAD number for third quarter at 5 pm today.

The aggregate CAD is expected to rise to USD 31 billion from USD 22.4 billion a quarter ago and USD 16.5 billion a year ago. The finance minister has repeatedly shown concerns over the widening current account deficit and had also taken measures like raising gold import duty to rein in the ever-increasing crevasse.

In his Budget speech finance minister P.Chidambaram noted, “CAD continues to be high mainly because of our excessive dependence on oil imports, the high volume of coal imports, our passion for gold, and the slowdown in exports. This year, and perhaps next year too, we have to find over $75 billion to finance the CAD.”

High CAD increases our dependence on foreign funds, which is not a good sign in the current volatile global environment. In a time when the government’s priority is to revive economic growth, high CAD can be a huge deterrent as it does not allow the central bank to take pro-growth initiatives   In its recent monetary policy review, Reserve Bank of India had stated that high current account deficit gave a limited scope for cutting key rates.

However, there have been some signs of improvement in this situation. India’s exports recorded a growth of 4.2 per cent on a YoY basis in February 2013. It is the first time since February last year that export grew at this pace.

In its recent report credit rating agency CRISIL noted, “India’s merchandise exports may recover further in 2013 due to an improved global economic outlook and government’s efforts to support exports. The FM in his budget speech stated that very soon a new trade policy will be announced to boost exports. On the other hand, lower crude oil prices coupled with the deregulation of diesel prices is likely to keep the oil import bill under check.”