The president of the Eurogroup, Jeroen Dijsselbloem, has crossed out this Tuesday of “disappointing” the rejection on the part of the Parliament of Cyprus of the rate to the deposits and has asked the Government of Nicosia that present alternatives so that the cost of the rescue does not surpass the 10,000 millions of euros.
On behalf of the Eurogroup, he assured that the eurozone “takes note” of the decision adopted by the Cypriot Parliament to reject the tax on private deposits.
“I confirm that the Eurogroup is prepared to assist Cyprus in its efforts for reforms and I reiterate the position we announced on Monday,” said Dijsselbloem.
Cyprus is free to submit proposals but must meet our conditions ” I am very sorry that Cyprus has adopted this decision, but the ball is still on its roof because the offer of the Eurogroup and its conditions remain on the table,” he added. “Cyprus has some freedom to submit proposals, but they must meet our conditions” to receive the ransom, the Dutch Finance Minister stressed.
The requirements of the Eurogroup are two: ” the plan cannot exceed 10 billion euros and the debt of Cyprus cannot be more than 100% of GDP (in 2020) because otherwise they will never be able to pay it and they will never come out of the hole”.
“There is no chaos”
Dijsselbloem denied that the situation after the vote of the Cypriot parliament is “chaos” and stressed that the Eurogroup approved by “unanimity” proposals to help Cyprus and now the “responsibility” to accept the offer is the Government of Nicosia.
The Government of Nicosia had initially requested a rescue of 17,000 million euros, equivalent to 100% of the GDP of the island, which according to the Eurogroup would have triggered the debt to unsustainable levels. Therefore, in their agreement on Saturday, the economy ministers of the eurozone reduced the amount of the loan https://citrusnorth.com/ to 10,000 million euros. And they approved the creation of the deposit rate to finance the rest of the necessary aid.
The Eurogroup estimated in 5.800 million euros the collection that would be achieved with the rate to the savers and warned on Monday that it would accept any change as long as these revenues were guaranteed.
The European Central Bank (ECB) has assured that it “takes note” of the decision of the Parliament of Cyprus to reject the conditions of the rescue and has reaffirmed its commitment to “inject” liquidity into the country “if it needs it within the existing rules”.
This communiqué of the body chaired by Mario Draghi comes after the Parliament of Cyprus has rejected the draft law on the removal of bank deposits agreed with the ‘troika’ – European Commission (EC), ECB and International Monetary Fund (IMF) ) – in exchange for the rescue of 10,000 million euros. The government party (Disy) has abstained in the vote, as planned. The text has not received any votes in favor and, instead, has obtained 36 against and 19 abstentions. A deputy was absent from Parliament.
Prior to this decision, the ECB and the IMF urged the Cypriot authorities to honor their commitments and supported the decision to apply a progressive deposit tax to protect small savers.
The ECB considers that “it is the Cypriot authorities who must decide how the program will be financed to ensure” the 5,800 million euros that Cyprus has to contribute to the rescue, according to European sources. The European Central Bank welcomes the Cyprus agreement with the Eurogroup, although it is not yet concluded. The agency also expresses its support for the intention of the Cyprus authorities to protect small savers, while European laws guarantee bank deposits up to 100,000 euros.
IMF Managing Director Christine Lagarde has said that “the Cyprus authorities have to honor the commitments made” and that the IMF also supports Nicosia’s intention to apply a progressive tax on deposits.
The German Government supports the drastic reduction of the banking sector in Cyprus and considers that Cypriot banks must reach the average level of the European Union until 2018. The Executive of Angela Merkel has warned the Cypriot authorities against any maneuver of delay or even against a parliamentary rejection of the rescue package agreed upon for that country because this would jeopardize the solvency of its banking system.