Eurogroup chief’s comment sparks controversy

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Having stirred a controversy by saying that the Cyprus bailout was a template for resolving banking problems in the Union, Eurogroup chief Jeroen Dijsselbloem said on Tuesday (26 March) there were no apparent signs of increased withdrawals of savings within the single currency zone. 

Dijsselbloem described the Cypriot bailout, which wiped out some top bank bondholders and will impose big losses on large depositors, as a new template for resolving eurozone banking problems.

He later appeared to backtrack, saying Cyprus was a specific case with exceptional challenges.

The comments by Dijsselbloem, the Dutch finance minister who has headed the eurozone finance minister for less than two months, infuriated politicians.

The Guardian described his statement as “an open invitation to any investor with more than €100,000 in a eurozone bank to remove it without delay, which some then did."

"We should focus on supporting Cyprus rather than unsettle markets with sappy remarks," CDU/CSU's parliamentary fiscal speaker, Klaus-Peter Flosbach, told the German business daily Handelsblatt.

The European Commission appeared to back Dijsselbloem on one account, saying that the EU executive would like the European taxpayers to stop paying for the banks’ mistakes. But it rejected the view that the solution to the Cypriot problem could be used as a template.

The Cypriot Parliament last week rejected an EU-led rescue plan for the country that would have hit both large and small depositors with a tax. Since then, a deal has been worked out to tax only those with deposits of more than €100,000.

Chantal Hugues, spokesperson to Internal Market Commissioner Michel Barnier, said steps to create an integrated banking union will providing supervision which did not exist previously, reducing the likelihood of another banking crisis.  

As the resolution mechanism proposed last year provides for ‘bail-in’ of banks – that is, the banks sharing the burden and suffering losses – Hugues said holders of deposits under €100,000 would not suffer harm.

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