Thursday

23rd Mar 2017

Eurogroup boss: Cyprus levy is 'inevitable'

Eurogroup boss Jeroen Dijsselbloem told MEPs on Thursday (21 March) that Cypriot savers will have to lose money no matter what the final shape of the bailout deal.

"It is inevitable that there will be some kind of levy in the final deal," he said.

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.

He described the proposed levy as "a tax measure, like a wealth tax."

He also said that Cypriot banks - which hold assets and liabilities worth eight times the country's GDP - will "have to be downsized and rebuilt on a healthy and sustainable business model."

With Cyprus' finance minister in Moscow the same day angling for Russian help, Dijsselbloem warned that an extra loan from Russia would do harm in the long run.

The EU and the International Monetary Fund are prepared to loan Cyprus €10 billion only, saying the island cannot sustain more debt.

"Anything above €10 billion would not allow them to make a restart," Dijsselbloem said.

The hearing in the European Parliament's economic affairs committee was Dijsselbloem first-ever in his new role as the head of the Eurogroup, the club of euro-using countries' finance ministers.

The group's original bailout plan - rejected by the Cypriot parliament on Tuesday - was to top-up the €10 billion loan with a €5.8 billion levy on Cypriot bank deposits.

Savings accounts worth between €20,000 and €100,000 were to be stung with a 6.75 percent tariff, while savings over €100,000 were to face a 9.9 percent levy.

The drastic unpopularity of the idea prompted a blame game among EU capitals.

In various statements made on Wednesday, the European Commission, the European Central Bank and Germany all claimed they had opposed taxing small savers.

They laid the blame at Cyprus' door, indicating that it took the step to protect wealthier savers and bond-holders from paying more.

For his part, Dijsselbloem on Thursday blamed himself for the defunct plan.

"As [Eurogroup] President I take responsibility for it," he said.

He also admitted that his Eurogroup talks "should have spent more time on the distinction between a one-off wealth tax and a deposit guarantee scheme."

Under EU law, member states are required to guarantee the first €100,000 of people's savings.

The Dutchman's mea culpa did little to alleviate MEPs' criticisms, however.

Sharon Bowles, a British liberal MEP who chairs the economic affairs committee, described his original bailout model as "a disaster for EU rules and single market principles."

Portuguese left-wing deputy Elisa Ferreira said the Eurogroup had "shaken the confidence of citizens across Europe."

Meanwhile, Markus Ferber, a German conservative, said that by punishing savers instead of bank shareholders, the bailout would have amounted to "an endorsement of the Cypriot banking sector" which helped caused the mess in the first place.

Cyprus struggling on bailout Plan B

With no firm offer from Russia, Cypriot officials are scrambling to find alternative money to secure a €10 billion EU bailout.

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.

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 MPs pass bank laws, start bailout talks

Cyprus edged back from the brink of bankruptcy on Friday after MPs agreed to a series of emergency reforms - including capital controls - in a bid to avoid financial meltdown.

News in Brief

  1. EU summons Turkish envoy over threats to Europeans
  2. British police make first arrests in London terror probe
  3. EU commission has received Facebook reply on WhatsApp
  4. Rome expects thousands of protesters at summit
  5. Dijsselbloem says his comments had 'Dutch directness'
  6. Ukraine spy agency bars Russian Eurovision singer
  7. Turkish president Erdogan threatens Europeans
  8. Russia invites EU diplomats to occupied Crimea

Stakeholders' Highlights

  1. EJCExpresses Concern That Extremists Still Have the Ability and Motivation to Murder in Europe
  2. European Gaming & Betting AssociationAudiovisual Media Services Directive to Exclude Minors from Gambling Ads
  3. ILGA-EuropeTime for a Reality Check on International Day for the Elimination of Racial Discrimination
  4. UNICEFHuman Cost to Refugee and Migrant Children Mounts Up One Year After EU-Turkey Deal
  5. Malta EU 2017Council Adopts New Rules to Improve Safety of Medical Devices
  6. Nordic Council of MinistersNordic Energy Research: How to Reach 100 Percent Renewable Energy
  7. Party of European SocialistsWe Must Renew Europe for All Europeans
  8. MEP Tomáš ZdechovskýThe European Commission Has Failed in Its Fight Against Food Waste
  9. ILGA-EuropeEP Recognises Discrimination Faced by Trans & Intersex People
  10. Nordic Council of Ministers25 Nordic Bioeconomy Cases for Sustainable Change
  11. Malta EU 2017Consumer Protection Laws to Be Strengthened by EU-Wide Cooperation
  12. European Free AllianceSupporting Artur Mas: Democracy and Freedom Cannot Be Convicted

Latest News

  1. Ending the migrant deal with Turkey may save the EU
  2. Poland unlikely to face EU discipline on rule of law
  3. Rutte courted Wilders' voters, now he must deliver
  4. Barnier to UK: trade talks will come after settling accounts
  5. EU declaration to voice unity in troubled times
  6. Terror attack shuts down UK parliament
  7. Catalonia and Scotland at core of Europe's geopolitical conundrum
  8. La présidentielle française sous cyber-alerte maximale