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EU says large depositors could be tapped in future bailouts

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(Globalpost/GlobalPost)

Brussels, Mar 26 (EFE).- The European Union's executive arm said Tuesday that while the formula used in the rescue of Cyprus' financial system, involving a levy on bank deposits over 100,000 euros ($129,000), is "unique," large depositors could suffer losses in future bailouts.

It is not likely that another euro zone nation will face the same circumstances as those confronting Cyprus, European Commission spokesperson Chantal Hughes said in Brussels.

The EC's proposal for addressing future crises aims to ensure that taxpayers are not left to foot the bill, she said.

"At no point is it possible to bail-in depositors under 100,000 euros, either now nor in the future," Hughes said.

"In the Commission's proposal, which is under discussion, it is not excluded that deposits over 100,000 euros could be instruments eligible for bail-in," she said.

The original plan for Cyprus involved taxing all bank depositors, but accounts below the 100,000-euro threshold were ultimately spared.

Those with more than 100,000 euros may lose as much as 40 percent of their assets, Cypriot Finance Minister Michalis Sarris told the BBC Tuesday.

EU officials are trying to calm the tensions raised by the messy handling of the Cyprus affair, which undermined public confidence in the Eurogroup's pledge to guarantee all bank deposits up to 100,000 euros.

Statements by Eurogroup President Jeroen Dijsselbloem indicating that the Cyprus formula could be used in future bailouts sent European stock markets into a tailspin on Monday.

Dijsselbloem, who is also the Dutch finance minister, subsequently walked back those comments.

The Eurogroup solution for Cyprus will destroy the country's financial sector and plunge its economy into recession, Nobel prize-winning Cypriot economist Christopher A. Pissarides told Efe Tuesday.

http://www.globalpost.com/dispatch/news/agencia-efe/130326/eu-says-large-depositors-could-be-tapped-future-bailouts