Friday, March 22, 2013

German Finance Minister Schäuble to Cyprus: There Can Be No Solution Without a Haircut

German Finance Minister Schäuble
10:45 am

Cyprus parliament is now meeting to vote on the current plan to raise 5.8 billion euros so that it can be granted EU assistance. The plan was formulated and drafted last night after Parliament rejected Troika’s conditions that that a “haircut” be imposed skimming funds from all bank accounts in Cyprus. Troika was forwarded the 61 page plan last night, however it is not yet known whether Troika will approve the latest plan. Cyprus has until Monday to come up with a Troika-approved plan the raise 5.8 billion euros.

After Cyprus, the smallest nation to request EU assistance, became the first to reject Troika’s conditions for assistance, the future of the island nation is unclear. In response to a question whether Troika is still willing to extend financial assistance to Cyprus Schaeuble answered in the affirmative, going on to say that the problem must be addressed at the root, "In Cyprus, it is the bloated and partially bankrupt banking sector. It must find a solution. The notion that this problem can only be solved by the taxpayers in the Eurozone, without participation of major creditors of banks in Cyprus cannot be passed to the citizens of Europe. Cyprus seems to have been a misunderstanding. This is not a contribution to the Cypriot savers to make in Europe. Challenge is not to lift another weight taxpayers-and-Cypriots, but to bear part of the creditors of the banks. They invested in the banks. Received large returns. By analogy, they should take the risk, like the bondholders in Greece-in order to find a way to Cyprus, as before, and Greece, to gain perspective on the markets return.”

By this statement Cyprus seems to have been a misunderstanding.This is not a contribution to the Cypriot savers to make in Europe Schaeuble seems to suggest that there was a misunderstanding regarding the “haircut” or levy on all bank accounts in Cyprus, which has been highly criticised on an international lever, implying that Cypriots believe that they are being asked to contribute financially to Europe. I have not heard this being stated once. No one in Cyprus thinks that Cyprus is being asked to contribute financially to Europe. This is not the issue and Schaeuble knows it.

In the wake of the international backlash against the levy Troika has been playing a blame-game with respect to whose idea the levy was, claiming that it was not Troika’s condition, but a measure Anastasiades decided himself to impose on the Cypriot people. In his address to the people last weekend when he announced that the levy was going to parliament, Anastasiades stated that Troika actually wanted a higher levy and that he negotiated it down to the terms that were submitted. Further, the levy was recognized as a possible condition the EU assistance before Anastasiades was even elected president.

In conclusion on the issue of the levy, it was Troika’s idea, and there is no misunderstanding as to what the levy was for.

No we wait to see whether the new plan is approved by parliament and then whether the new plan contains enough a of "haircut" for Troika. 

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