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Germany: Cyprus must finance EU bailout

The Local · 18 Mar 2013, 12:35

Published: 18 Mar 2013 10:17 GMT+01:00
Updated: 18 Mar 2013 12:35 GMT+01:00

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"How the country makes its contribution, how it makes the payments, is up to the Cyprus government," government spokesman Steffen Seibert said, as a finance ministry spokesman added the bailout would have a "largely calming effect" on the eurozone.

The European Central Bank (ECB) opened the door on Monday to possible amendments to a tough EU bailout deal for Cyprus, arguing that as long as the financing secure, it was up to the Cyprus government to decide how to raise it.

"It's the Cyprus government's adjustment programme, not the Troika's or any other government's," Germany-based ECB executive board director Jörg Asmussen told a conference here.

The troika is the term used for international creditors, the European Union, the ECB and the International Monetary Fund.

"If Cyprus's president wants to change something in the structure of the levy on bank deposits, that's in his hands. He must simply make sure that the financing is intact," Asmussen said.

Cyprus President Nico Anastasiades is currently seeking the backing of MPs for an EU bailout deal that slaps a tax on bank savings under harsh terms that have jolted global markets and raised fears of a new eurozone debt crisis.

Ahead of a parliamentary vote on the hugely unpopular measure on Monday afternoon, negotiators are seeking to soften the blow on small-time depositors, who have been stunned by the announcement that their savings will be skimmed.

As a condition for a desperately-needed €10 billion bailout for Cyprus, fellow eurozone countries and international creditors Saturday imposed a levy on all deposits in the island's banks.

Deposits of more than €100,000 will be hit with a 9.9 percent charge, while under that threshold the levy drops to 6.75 percent. The proposal must still be passed by parliament.

Cyprus's share of the financing of the deal is around €5.8 billion euros.

ECB board member Asmussen insisted it was Nicosia's programme. "They must decide its parameters. It's not as if the Troika was adamant about this particular structure," Asmussen argued.

Cyprus is the fifth eurozone country to turn to its partners for aid, but the first where savers are being asked to foot part of the bill.

Story continues below…

The deal sent European stock markets into a tailspin on Monday amid fears of a bank run in Cyprus.

Asmussen said the situation in Cyprus's banking sector was such that "no easy, risk-free decision was possible."

The situation in Cyprus was "unique," he said when asked whether similar conditions could be imposed on other countries seeking a bailout.


The Local (news@thelocal.de)

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Your comments about this article

12:33 March 18, 2013 by schneebeck
Here we go.
13:40 March 18, 2013 by chicagolive
So basically now if you save you will be screwed over. I understand that a over saving people can cause economical trouble for a country but little Cyprus is mostly a tourist spot.
14:17 March 18, 2013 by melbournite
so lets hit the mums and dads and pensioners, and let the big money bond holders (German banks) off scot-free. Whats the point of being an honest worker and a sensible citizen who saves in a crisis rather than run up big loans, when the government (of the rich, by the rich, for the rich) just steals from you?
16:23 March 18, 2013 by Istabraq
This whole thing is getting ridiculous. Screwing people who have a bit of money saved in order to protect the super rich bond holders is plain immoral and maybe illegal also. I hope there are enough legal challenges to this to make it too expensive to carry out. If the bond holders were burnt you can be sure they would have lawyers queing up outside parliament in Brussels and everywhere else.
18:54 March 18, 2013 by michael4096
It's amazing that nobody asks why savings accounts are hit. Most people just assume that it's greed or whatever.

Cyprus's banks offer higher returns on savings than other European banks. They can do this because the banks take big risks knowing that in the end they'll get bailed out. Put another way, the European tax payer is subsidizing big returns to savings' account holders. Which is why for every euro saved by Cypriots there are 7 euros invested there by non-Cypriot millionaires, mainly Russians. Ever wondered why the Russian government is such a big part of this deal?

I don't know if this is the right approach or whether the interest earned should be hit rather than the capital or whatever but, as a tax payer, I don't like subsidizing high returns to Russian millionaires.
19:05 March 18, 2013 by jg.
Quite apart from the immorality of stealing money from savers, choosing to do this in such an abrupt manner is guaranteed to see most foreign depositors remove their money from Cyprus at the earliest opportunity, regardless of the decision to implement the measures. Just the Russian corporate accounts in Cyprus are reputed to be worth about $19 billion. If the people who dreamt up this idea didn't understand that this would cause a run on Cypriot banks, they are imbeciles (it is about as stupid as the time when Gordon Brown announced he would dump 400 tons of gold onto the world markets with 3 months notice). It also presents the possibility that similar measures could be applied in other indebted countries of the EZ - why would anyone now keep a savings account in any of the PIIGS?

Like Cyprus, Ireland has a special on corporation tax for foreign companies - does that mean Ireland will be in line for similar treatment?
03:44 March 19, 2013 by smart2012
all of this is so crap.... cyprus has been a money laundery for russian and European (and Germans) and then who must pay the bill is cyprus tax payers... And this cause Europe (led by Verkel) is falling apart as an unflexible and close minded robot.

Germans, wake up... or it will be too late
17:41 March 20, 2013 by Englishted
If they can do it there they will do it anywhere (New York ,New York ,sorry),which must endanger any investment in the Euro zone ,with a possibility of runs on the banks.

This power mad E.U. must be stopped ,it appoints unelected heads of Government ,now it allows the raiding of personnel savings accounts .

Wake up Europe before they steal your beds.
11:00 October 28, 2013 by SheilaZ
Credit union registration is becoming the ¦quot;in¦quot; thing lately, as the previous two years were filled with individuals ditching big banks for community based ones. They aren't exactly running in droves, but a steady stream is pouring out of the banking industrial complex into credit unions. Resource for this article: why now don't appear find people presently with this blog?
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