Belfast Telegraph

Thursday 21 August 2014

Bailout for Cyprus 'must now become the default setting'

Demonstrators hold an anti-bailout banner during a student parade
Demonstrators hold an anti-bailout banner during a student parade

A top European official has said the Cyprus bailout, which was agreed in last-ditch negotiations held over the weekend, should become the bloc's default approach for dealing with ailing lenders.

Jeroen Dijsselbloem, who chairs the Eurogroup gatherings of the 17 eurozone finance ministers, stated in an interview that banks' owners and investors must now be held responsible "before looking at public money or any other instrument coming from the public side."

Dijsselbloem, who is also Dutch Finance minister, said the €10bn Cypriot rescue marked a watershed moment in how best to deal with failing banks.

He said that European leaders should be committed to "pushing back the risks" of paying for bank bailouts from taxpayers.

"If there is a risk in a bank our first question should be 'OK, what are you in the bank going to do about that?'," he told Reuters and the Financial Times.

Mr Dijsselbloem's comments came ahead of an announcement by Cyprus' central bank that all the banks in the country except the two biggest institutions will reopen for business today, more than a week after they shut down to prevent a run.

Laiki and Bank of Cyprus will remain closed until Thursday, and a withdrawal limit from ATMs of €100 (£85) a day will also remain in place until then, the Cypriot central bank said.

Financial institutions in the country have been shut since March 16 as Cyprus and its international lenders have struggled to agree on a plan to raise funds so that the island could qualify for the granting of a bailout package.

The 11th hour bailout package was welcomed by Prime Minister David Cameron, and was also backed by the United States.

Russia, however, responded furiously to the deal – condemning it as 'stealing'. Thought the arrangement with the European Union has brought Cyprus back from the brink it will still mean that investors with more than €100,000 (£85,000) in the nation's largest banks forfeit a large chunk of their deposits.

"In my view, the stealing of what has already been stolen continues," Russia's Prime Minister Dmitry Medvedev was quoted by news agencies as angrily telling a meeting of government officials.

Despite this Russia also signalled its intention that it would backstop the European Union's bailout of Cyprus despite the clear anger that the weekend rescue deal would impose heavy losses on uninsured depositors, many of them Russian.

President Vladimir Putin ordered his government to negotiate the restructuring of a bailout loan it granted to Cyprus in 2011 – having rejected Nicosia's request for easier terms during crisis talks last week.

Putin "considers it possible to support efforts ... aimed at overcoming the crisis in the economy and banking system of this island state," his spokesman Dmitry Peskov said.

Meanwhile David Cameron said that the economic situation in Cyprus should be a "reminder of a couple of important home truths" for the UK.

During a visit to Ipswich, the Prime Minister said he was glad that some savers would be spared the one-off levy and insisted that the Government was doing everything it could to protect soldiers and staff on the island.

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