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Merkel blamed for Cyprus bailout 'disaster'

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Merkel blamed for Cyprus bailout 'disaster'
10:52 CET+01:00
German Chancellor Angela Merkel on Wednesday said the eurozone had a "duty" to work with Cyprus to resolve the island's banking crisis, as the German opposition blamed her for the "disastrous" rejection of the EU's bailout package.

"Cyprus is our partner in the euro area and that is why it is our duty to find a solution together," Merkel told reporters after talks with German lawmakers.

"I regret the vote of the Cypriot parliament yesterday but of course we respect this vote. Now we are waiting to see what proposals Cyprus makes to the troika," she added, referring to the group of international creditors.

On Tuesday Cypriot MPs unanimously rejected the terms of an EU bailout, decrying as "blackmail" the deal, which offered the debt-laden island €10 billion on the condition a controversial levy be put on large savings in Cypriot bank accounts.

The levy would have taken up to 10 percent from larger accounts, many of which are held by wealthy Russians and other foreigners, while sparing small savers with less than €20,000.

Merkel said that while the banking sector should stump up part of Cyprus's

share of the bailout, she noted that eurozone finance ministers do not support

drawing a contribution from depositors with less than €100,000 in their accounts.

Although she and other EU leaders have since distanced themselves from the controversial proposal, Germany's political opposition slammed Merkel's handling of the crisis.

"Even if [Chancellor] Angela Merkel doesn't want to know any more: the Cyprus disaster bears her signature," Sigmar Gabriel, leader of the main opposition Social Democrats (SPD) told Der Spiegel magazine on Wednesday.

"[Chancellor] Angela Merkel shares responsibility for [the result] that in Cyprus small time savers are expected to foot the bill - but the banks get away scot-free," Gabriel told the magazine.

Furious Cypriots demonstrated against the compulsory levy on offer by the Troika - the European Union, the European Central Bank and the International Monetary Fund, with many islander politicians also placing the blame squarely on German shoulders.

It was the first time in the eurozone debt crisis that national politicians had rejected the terms offered by the Troika on a badly needed bailout package.

In the words of one Cypriot Green Party MP during the parliamentary debate on Tuesday, the banking sector needed down-scaling, "but not with a pistol against its chest" and "not on the basis of a deal which destroys Cyprus's economy and makes us into slaves."

Amid the chaos, Cyprus was forced on Monday to close banks until at least Thursday after large queues formed at ATMs on the island.

As the island struggled to regain its composure on Wednesday, German Finance Minister Wolfgang Schäuble said he regretted the Cypriot parliament's rejection of the bailout offer and warned against "irrational, irresponsible solutions" to its debt crisis.

"We acknowledge and regret the decision. For a rescue plan to exist we need a credible way to know how Cyprus will regain access to financial markets," said Schäuble in a television interview. "For now the debt is too high ... it must be reduced."

"The situation is serious but this must not lead us to take decisions that make no sense," he told public ZDF television, without elaborating.

Schäuble's comment came as the Cypriot Finance Minister Michalis Sarris met with Russian counterpart Anton Siluanov in Moscow, where the EU bailout offer has also been greeted with widespread anger.

Russian investors with vast amounts of cash in the island's banks would stand to lose billions of euros from the introduction of the levy on larger accounts.

AFP/DPA/The Local/jlb

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