Eurogroup chief Jeroen Dijsselbloem has taken responsibility for the initial proposal to tax all deposits in Cyprus but has also insisted that Nicosia does not have any other options than to accept the plan offered by the eurozone and International Monetary Fund.
“The decision [to tax small savers] was a joint one but as Eurogroup, I take full responsibility for the agreement,” he said during an appearance before European Parliament’s economics committee.
“Cyprus’s tax was a wealth tax, we specifically tried to target non-resident depositors,” said the Eurogroup head. "The vast amount of depositors in Cyprus are not really savers. They're investors."
However, Dijsselbloem indicated that it was the Cypriot government’s decision to tax deposits under 100,000 euros. “Different national interests, including the Cypriot government’s opinion, led to the idea that small savers should contribute.”
Dijsselbloem, however, indicated that Nicosia did not have any option but to return to the idea of a deposit tax in order to secure an EU-IMF bailout.
“I'm not sure that this package is completely gone and failed, because I don't honestly see many alternatives," he said. "There is of course a different way to do the levy, and we're very open to a more fair approach to the way the levy is structured."
The Dutch finance minister said it appeared that Russia was not interested in providing funding for Nicosia.
Dijsselbloem also said that loan from Russia would not help make Cyprus’s debt more sustainable.
"The only thing I can say that if the Russians were to say we could lend, that wouldn't help on the sustainability of the debt situation," he said "Building up the debt in Cyprus does not help them to work towards a new future."
He said one of the motives for the deposit tax was to keep Cyprus’s national debt as low as possible.
"I still think its probably inevitable there will be some kind of levy in the final package that we will agree upon," he said.
"The Eurogroup thinks it's very important that we should have a fair burden share, and that means a larger contribution from large depositors than, of course, from small depositors."
The Eurogroup chief said that the eurozone had taken too long to address the problems with the Cypriot banking model. He expressed concern about the consequences of the instability created in Cyprus.
“In the present situation I think there is definitely a systemic risk and I think the unrest of the last couple of days has proven this, unfortunately," he said in a comment that appeared to contradict some of his colleagues in the Eurogroup and the German position that the consequences of a Cypriot banking collapse and euro exit could be contained.
However, Dijsellbloem denied that the troika’s plan would bring down the Cypriot banking system. “We want the Cypriot financial sector to make a restart as part of the bailout,” he said.
SYRIZA MEP Nikos Chountis asked Dijsellbloem if the Eurogroup was simply incompetent or whether it had ulterior motives. The Dutchman said he would leave the Greek Euro MP to decide.