We did the best that was possible so that the Cypriot debt would remain sustainable and the European taxpayers would not to be burdened because of the investment risks taken by the two Cypriot banks”, Eurogroup President Jeroen Dijsselbloem has said in response to criticisms by Members of the European Parliament on dealing with the rescue of Cyprus.
Jeroen Dijsselbloem was asked to give explanations to the Committee on Economic and Monetary Affairs of the European Parliament about what had happened during the crisis in Cyprus but also the content of the Eurogroup’s decisions in March.
In his introductory speech, Dijsselbloem referred to the current developments emphasizing that the aid programme for Cyprus has been finalized and it was the subject of much attention, while he described it as an opportunity for Cyprus economy to get back on the right track.
He added that the disbursement of the first tranche of the loan for Cyprus will be made within May, noting that interest rates of the loan will be low so that Cyprus will be able to pay it off.
Asked how we had arrived at this decision, he refused to reveal anything in relation to the negotiations stressing that his role is not to refer to the position held by each Eurozone country.
As he said, Cyprus’ financial problem has arisen since 2011, but no discussions were held to solve it, "because the Cypriots reached an agreement with the Russians and gained time in order not to go into a memorandum”.
He noted that if Cyprus had asked for help earlier, then the problem would have been addressed sooner, he said.
According to Dijsselbloem, the discussion on the serious problems faced by the two Cypriot banks (Laiki and Cyprus) had started only when the new government took office and no such a discussion was held during the term of the previous government.
Eurogroup President said that the situation in Cyprus was complicated and the problem too big with a few options available with regard to whom should the burden of the rescue be shifted.
As he said, “we could not transfer the burden of the rescue to the public debt of Cyprus, because the country could not serve it, while we could not transfer it to the European Stability Mechanism neither because it would not be right”.
He said that we shifted the burden to the big depositors and this was the best solution.
Our first priority, he noted, was the sustainability of the debt, adding that if the burden was shifted to the state, then Cyprus would never be able to pay off its debt, while with the option taken the country will be able to recover.
In response to a question whether the crisis in Greece has affected Cyprus, he replied that the Greek crisis had indeed affected Cyprus due to the fact the Cypriot banks seeking high returns had invested in Greek bonds and loans. It was a risk they took and they have faced the consequences, he said.
He also said that it was not the Greek crisis that caused the Cyprus financial problem, but the Cypriot banking model that had made investments which could only lead to these risks.
The decision was delayed, Dijsselbloem concluded, due to the branches of Cypriot banks in Greece “because we had to make sure that everything would be ready to save those branches.”
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