Monday

27th Feb 2017

Germany to Cyprus: your banks might never re-open

Germany has warned Cyprus that the European Central Bank (ECB) will pull the plug on its two largest banks in the absence of a bailout programme and said the terms of the rescue will not change.

German finance minister Wolfgang Schaeuble told the ZDF public broadcaster on Tuesday night (19 March) he "took note with regret" of the Cypriot parliament's rejection of the bailout deal, but insisted that the terms will stay the same.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

Asked if the eurozone was willing to let Cyprus go bust, he answered: "Well, we are much more stable in the eurozone - we took measures to protect ourselves from the risks of contagion ... but I don't want to have any of this."

He added: "It is a serious situation, but this cannot lead to a decision that makes absolutely no sense, to rescue a business model that has failed. Cyprus has a banking sector that is totally oversized and this made Cyprus insolvent. And nobody outside Cyprus is to blame for it."

He said the Cypriot government might think it can continue to attract big capital inflows with low taxes and lax legislation, but warned that taxpayers in other countries will not pay for it if it goes wrong.

The ECB is currently keeping the two largest banks in Cyprus on an emergency lifeline, even as their branches remain closed this week in an emergency bank holiday.

If the bailout cannot be agreed, Schaeuble warned that the ECB will pull the plug: "It won't last until June. It is a question of them being able to open at all. Without the money from the ECB they are insolvent."

Later on, in another interview with the ARD public broadcaster, he repeated the warning:

"The Cypriot state cannot fund itself on the markets. Its two largest banks are insolvent and are being kept afloat with emergency funding from the ECB, but only on the condition that there will be a long-term rescue programme. If this condition is no longer met, Cyprus will no longer be solvent and this is something Cypriot decision makers must know," he said.

For his part, Eurogroup chief and Dutch finance minister Jeroen Dijsselbloem said the EU offer for Cyprus still stands: "I confirm that the Eurogroup stands ready to assist Cyprus in its reform efforts and reiterate the position of the Eurogroup as I stated yesterday."

The ECB said it will keep up its emergency funding to Cypriot banks "within the existing rules."

But the Austrian ECB board member, Ewald Nowotny, told Cypriots not to expect free money.

"I believe one must expect from the Cypriots a realistic position, otherwise there is only the hope that somebody makes them a present, be it the Russians, be it the EU," he told the ORF public TV station on Tuesday.

"I would not place too much hope on that," he added.

The Cypriot parliament earlier on Tuesday rejected a €10 billion bailout deal, which included a controversial plan to take €5.8 billion from ordinary people's bank accounts in a one-off tax.

Cyprus rejects bailout deal

The eurozone plunged into uncertainty on Tuesday after the Cypriot parliament rejected its EU bailout plan by an overwhelming majority.

Cyprus blamed for decision to tax small savers

The European Commission has said it was Cyprus itself that insisted on the most unpopular detail of its bailout. But the commission is not squeaky clean either, say others.

Eurogroup boss: Cyprus levy is 'inevitable'

Eurogroup boss Jeroen Dijsselbloem told MEPs on Thursday that Cypriot savers will have to lose money no matter what the final shape of the bailout deal.

News in Brief

  1. Spanish court jails former IMF chief Rato
  2. Macron proposes Nordic-style economic model for France
  3. Germany posts record high budget surplus
  4. Labour ousts Ukip in Brexit homeland
  5. Dutch lower house approves EU-Ukraine treaty
  6. WTO says Russian pork ban was illegal
  7. Belgian nuclear plant made 'significant progress' on safety
  8. Report: Commission gauging EU support for Poland sanctions

Stakeholders' Highlights

  1. EURORDISJoin Rare Disease Day and Help Advocate for More Research on Rare Diseases
  2. European Healthy Lifestyle AllianceStudents Who Are Considered Fit Get Better Grades in School
  3. QS World MBA TourMeet with Leading International Business Schools in Paris on March 4th
  4. Malta EU 2017Economic Governance: Agreement Reached on Structural Reform Support Programme for Member States
  5. Socialists & DemocratsWomen Have to Work Ten Years Longer to Match Lifetime Earnings of Men
  6. Counter BalanceTrans-Adriatic Pipeline Is a Major Risk for Banks, Warns New Analysis
  7. Martens CentreEU and US Migration Policies Compared: Join the Debate on February 28th
  8. Swedish EnterprisesTechnology and Data Flows - Shaping the Society of Tomorrow
  9. UNICEFNearly 1.4 Million Children at Risk of Death as Famine Looms Across Africa and Yemen
  10. Malta EU 2017End of Roaming Fees: Council Reaches Agreement on Wholesale Caps
  11. Nordic Council of MinistersNordic Innovation House Opens in New York to Help Startups Access US Market
  12. Centre Maurits CoppietersMinorities and Migrations