The eurozone was still embroiled in an acrimonious dispute tonight over whose idea it was to impose a tax on the savings of ordinary depositors in Cypriot banks – a decision that has instigated a financial panic on the Mediterranean island and reactivated the wider eurozone sovereign debt crisis.
At the weekend, the Cypriot government briefed the media that Wolfgang Schauble, the German Finance Minister, and Christine Lagarde, the head of the International Monetary Fund, had been instrumental in pressuring Nicosia to impose the levy on small depositors as the price of the country’s €10bn bailout. “We didn’t expect such demand from our European partners” said Cypriot President, Nicos Anastasiades.
But that interpretation of events was firmly denied by Mr Schauble earlier this week. He instead placed the blame for the levy on the Cypriot government itself and also the European Commission and the European Central Bank.
“They have opted for this solution and will now have to explain it to the people of Cyprus,” said Mr Schauble.
This account was seemingly backed up by the eurogroup – a collection of eurozone finance ministers – who released a statement on Monday night claiming they had always wanted small depositors to be protected.
Yet the European Central Bank has distanced itself from the decision too. “It’s the Cyprus government’s adjustment programme” the ECB’s German board member Jorg Asmussen stressed this week, urging Nicosia to revisit the levy.
A Reuters report on Monday suggested the idea had come from a desperate President Anastasiades, who adopted the 6.7 per cent tax on savings below €100,000 after failing to persuade his eurozone counterparts to increase the overall size of the bailout. The report also suggested the President had been motivated by a desire to mitigate the impact on wealthier depositors and to protect Cyprus’s status as an offshore banking centre.
However, an insider account of the Brussels negotiations from the Wall Street Journal muddied the waters further by suggesting that the idea of the levy for small savers was first put forward by the Economic Affairs Commissioner in Brussels, Olli Rehn.