Eurocrats engage in Cyprus blame game

The German government insisted yesterday it had not demanded that Cyprus hit ordinary depositors as the price of its eurozone bank rescue, pointing the finger of blame instead at the government in Nicosia and the institutions of the eurozone.

In signs of schism among the single currency bloc's leadership, the German finance minister, Wolfgang Schäuble, insisted that Berlin had been in favour of "respecting" the pan-eurozone deposit guarantee and said the surprise levy on modest savers had been the idea of the Cypriot government, along with the EU and the European Central Bank.

Cyprus yesterday postponed a parliamentary vote on the bailout terms until 6pm today, amid a public backlash against the levy on small savers and fears that the move could trigger financial contagion across the southern eurozone. The vote is reported to be on a knife edge. The country's central bank yesterday announced that banks would remain closed until Thursday in order to prevent panic withdrawals.

The euro slid when markets opened and European banking stocks sank, although they later recovered most of the lost ground. Analysts warned that further falls could follow if the rescue package was rejected by the Cyprus parliament.

John Higgins at Capital Economics said: "Concerns about the potentially disastrous financial and economic consequences of bank runs could continue to weigh on share prices. And the return of fears that Cyprus may actually leave the eurozone altogether could lead to a sustained correction in the prices of riskier assets generally, including equities."

In an apparent softening of the ECB's line, Jorg Asmussen, a German member of the central bank's governing council, yesterday said Nicosia was free to shift the burden of the "bail-in" further away from small savers to larger ones. "It's the Cyprus government's adjustment programme" he said. "If Cyprus's president wants to change something regarding the levy on bank deposits, that's in his hands. He must just make sure that the financing is intact."

Germany had gone into negotiations on the Cyprus bailout insisting that the eurozone states would provide only €10bn (£8.6bn) to rescue the country's tottering banks, and that Nicosia needed to find the rest of the €16bn needed to stabilise its outsized financial sector. Under the original proposal those with savings of less than €100,000 in Cypriot banks would face a compulsory 6.7 per cent levy on their savings, while those with more would face a 9.9 per cent levy. In return they would receive equity in the bank. This is the first time that ordinary savers have been required to contribute to a eurozone bailout.

Some of Cyprus's largest bank depositors are Russian, and accusations abound that the island nation serves as a tax haven for laundered money. Cypriot banks have assets and liabilities equivalent to 700 per cent of the country's GDP and banking is its second largest industry after tourism.

There were reports yesterday that the authorities in Nicosia were considering reducing the levy on deposits under €100,000 to 3 per cent, at the same time raising the levy on larger amounts to 12.5 per cent.

Eurozone ministers held a teleconference call last night to discuss the fallout from the Cyprus affair.

Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss