Nicosia is reportedly upset by the latest statement of German Finance Minister Wolfgang Schaeuble, who told Welt Am Sonntag that Germany wanted to shareholders of Cypriot banks to shoulder their lenders’ losses, but the Cypriot government refused to accept that.
In his interview with the German Sunday newspaper, Schaeuble left open the possibility of failure in the negotiations between Cyprus and the eurozone and stressed that rules will have to be obeyed.
Cypriot media reported as hostile the “I will not be blackmailed” statement of the German minister to his country’s newspaper, as just a few hours before the crucial Eurogroup meeting on Sunday evening he warned that Cyprus’s eurozone membership depends on the bailout plan it is negotiating with the troika of the European Commission, the European Central Bank and the International Monetary Fund.
“While negotiations are ongoing, I cannot say with certainty whether the eurozone will accept to extend financial assistance to Cyprus. Only if the troika estimates there is a plan which offers a solution to Cyprus’s problems, and which adheres to the rules, will the Eurogroup be able to examine the problem,” said Schaeuble.
“Cypriot officials should have told the truth to their citizens. Our proposal was never about the involvement of depositors [in the bailout]. The German position was identical to the IMF’s: If the two main banks do not have a sustainable model anymore, it is their shareholders who should shoulder the losses. But [Cypriot] officials did not even want to hear about that,” Schaeuble told Welt Am Sonntag.
“At any rate Cyprus has got a tough road ahead of it. And that is not due to European inflexibility, but due to a financial model that is not operative any longer.”
The IMF is said to be insisting on Bank of Cyprus absorbing the healthy part of Cyprus Popular Bank, which BoC has rejected as that would entail 9 billion euros of more loans from the emergency liquidity assistance mechanism of the ECB to burden the island’s biggest lender.
Some sources add that the IMF also wants a break-up of BoC in a good and bad bank.