Propositions of alternatives to the full bailout for Cyprus, which were included in the European Commission’s confidential memorandum mentioned by the FT in the European morning, were rejected by the country’s government which said that imposing losses on bank depositors would be against its law and constitution.
"I would say that the bail-in of depositors is a grossly exaggerated possibility, unlikely to happen, we will not accept it under any circumstances and I don't think it creates any way forward," said Cypriot Finance Minister Vassos Shiarly heading for the Eurogroup meeting on Monday. He also ruled out a debt restructuring for his country which he said was "completely, totally off the table."
Eurozone finance ministers plan to finalize the aid program for Cyprus after the country’s general elections scheduled for 17 and 24 February.
Eurogroup eyeing alternatives to full bailout for Cyprus
EU finance ministers are due meet today at noon in Brussels in order to discuss the bailout for Cyprus as well as situation in Greece and the framework for the direct recapitalization of EU banks. IMF head Christine Lagarde will also take part in the talks.
The FT reports that a confidential memorandum on the aid for Cyprus has been prepared and will be discussed by the Eurogroup today. It contains three propositions of how to avoid a full bailout for the country: “a ‘bail-in’ of investors and depositors, and drastic shrinking of the Cypriot banking sector”, a “bail-in” of “ junior debt holders, but not bank depositors”, as well as allowing “Cyprus to sell the shares it acquires in its ailing banks to the European Stability Mechanism.”
ECB executive board member Joerg Asmussen told the German newspaper Handelsblatt that he expects the aid package for Cyprus to be in place by the end of March.
As far as direct recapitalization of banks is concerned, the Eurogroup will try decide on a date from which the ESM will be able to intervene and on the maximum amount of money for each recapitalization.
This will be the first Eurogroup meeting chaired by Dutch Finance Minister Jeroen Dijsselbloem who takes over from the outgoing Jean-Claude Juncker.