Tuesday

25th Jun 2019

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.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

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. EU to sign free trade deal with Vietnam
  2. EU funding of air traffic control 'largely unnecessary'
  3. Share trading ban looms as Swiss row with EU escalates
  4. Cooperation needed on Brexit, says Johnson
  5. Europe hit by record breaking June heat wave
  6. Liberal split complicates talks on new Spanish government
  7. Italy unravels massive European VAT carousel fraud
  8. Venezuelans cause spike in EU asylum bids

Feature

Romania enlists priests to promote euro switchover plan

Romania is due to join the single currency in 2024 - despite currently only meeting one of the four criteria. Now the government in Bucharest is enlisting an unlikely ally to promote the euro to the public: the clergy.

Trump and Kurz: not best friends, after all

The visit of Austrian chancellor Sebastian Kurz to the White House on Wednesday showed that the current rift in transatlantic relations is deepening by the day.

Stakeholders' Highlights

  1. Nordic Council of MinistersNo evidence that social media are harmful to young people
  2. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  3. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  4. Nordic Council of MinistersEducation gets refugees into work
  5. Counter BalanceSign the petition to help reform the EU’s Bank
  6. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  7. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  8. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  9. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  10. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  11. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  12. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody

Latest News

  1. EU parliament gives extra time for leaders on top jobs
  2. Europe's rights watchdog lifts Russia sanctions
  3. EU-Vietnam trade deal a bad day for workers' rights
  4. EU 'special envoy' going to US plan for Palestine
  5. Polish judicial reforms broke EU law, court says
  6. EU study: no evidence of 'East vs West' food discrimination
  7. Russia tried to stir up Irish troubles, US think tank says
  8. Babis unmoved by protests over EU scam allegations

Join EUobserver

Support quality EU news

Join us