Tuesday

31st May 2016

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.

Finance ministers baulk at tax-avoidance rules

Member states will discuss again in June a proposed directive to outlaw practices used by large companies to avoid paying taxes. Meanwhile, the European Parliament makes progress on its probe of Panama Papers.

Stakeholders' Highlights

  1. ACCAEducation and Training 2020 - Giving Young People the Workplace Skills They Need
  2. EPSUTrade Unions Back New Undeclared Work Platform
  3. European Healthy Lifestyle AllianceCould targeting children’s fitness boost academic performance?
  4. World VisionDeclares the World Humanitarian Summit a Positive Step in a Longer Journey to Ending Need
  5. EJCPresident Dr. Moshe Kantor on Brexit and the Jewish Question
  6. Swedish EnterprisesNew rules for posted workers - Better Protection or the End of Posting ?
  7. World VisionWhy The EU Needs to Put Children at the Centre of Emergencies - In Their Words
  8. ACCASustainability Reporting in Danger of Losing Its Momentum Says ACCA and CDSB
  9. Dialogue PlatformDiversity as Heritage of Humanity! Join the “Colors of the World“ Show at the EP
  10. Centre Maurits CoppietersNew Responses to the Basque Peace Process? MEP Juaristi on Stateless Challenges Conference
  11. European Healthy Lifestyle AllianceImproving Cardiovascular Health Begins by Closing the Gap in Sex Disparities
  12. IPHRBrussels Talks to Take Stock of Human Rights in Turkmenistan

Latest News

  1. EU watchdog calls for fines on shady lobbyists
  2. 2015 was 'a bad year' for EU human rights
  3. Deal with Greece will not work, says Guy Verhofstadt
  4. Greece says it cannot fulfil demands for loans
  5. Juncker agrees to visit Russia in June
  6. Pro-Brexit Tories predict Cameron leadership challenge
  7. Merkel and Hollande pledge unity at Verdun ceremony
  8. Russia mocks ex-Nato chief's new Kiev job