European Union Economic and Monetary Commissioner Olli Rehn said there won’t be a repeat of the tax on bank deposits that was imposed as part of Cyprus’s aid program.
Asked whether a future EU-mandated bank levy can be categorically ruled out, Rehn said that “it can and there is no concrete case where it should be considered.”
Speaking in an interview in Brussels early today after euro finance chiefs worked out the 10 billion-euro ($13 billion) Cypriot package, Rehn said he doesn’t expect an adverse market reaction to the precedent-setting tax on deposits both above and below the insured limit of 100,000 euros.
“Market forces understand that the sheer size of the problem of the Cypriot banking sector and its troubles were so huge that we needed to take very substantial measures,” Rehn said. “This kind of stability fee is clearly a much better choice from the point of view of financial stability and Cypriot citizens than a full-scale bail-in, which would have led to very chaotic consequences in the Cypriot economy.”