Cyprus’s decision to force losses on bank deposits doesn’t set a precedent for the rest of the euro region, European Union President Herman Van Rompuy said in an interview with De Zondag.
Van Rompuy was cited as saying that euro-area finance ministers made an “unfortunate decision” in approving an initial plan to tax bank accounts below the EU-insured limit of 100,000 euros ($128,000). That plan, which was rejected by the Cypriot parliament, and a subsequent agreement to force losses on creditors of the country’s two largest banks, won’t threaten other nations, he said in an interview with the Belgian newspaper.
“Cyprus is a special case, because of the size, structure and characteristics of its financial sector,” Van Rompuy said in the interview, published on Sunday. He reiterated that insured depositors are protected under EU law.
Cyprus’s decision to make uninsured depositors and senior creditors share in the cost of the country’s 10 billion-euro bailout roiled markets last week. The measures were accompanied by capital controls to avert a bank run.
Van Rompuy defended Cyprus’s agreement with EU authorities and the International Monetary Fund. “The plan is the only possible way to reduce the costs for the European taxpayer while at the same time make Cyprus debt sustainable,” he was quoting as saying in the interview.
Van Rompuy said the euro region is showing signs of being able to overcome its sovereign debt crisis and recession.
“It’s our estimate that by the end of this year, beginning of next year, we will return to positive growth,” he was quoted as saying. [Bloomberg]