The reputation of Dutch finance minister and Eurogroup chairman Jeroen Dijsselbloem took another knock on Monday when he appeared to suggest the Cyprus rescue deal would be the way forward for other banks in trouble.
‘Taking away the risk from the financial sector and putting it on to taxpayers’ shoulders is not the right approach,’ he said.
‘If you can’t deal with the risks, you shouldn’t have taken them on and the consequence might be that it is the end of story,’ he said. ‘That’s an approach I think we, now that we are out of the heat of the crisis, should consequently take.’
Dijsselbloem went on to say the shift in policy would have an impact on countries like Luxembourg and Malta which also have large financial sectors. ‘Realise if a bank gets in trouble, the response will no longer automatically be: we’ll come and take away your problems,’ the FT quoted the Eurogroup president as saying.
This, Reuters pointed out, is a ‘radical departure for eurozone policy after three years of crisis in which taxpayers across the region have effectively been on the hook for resolving problem banks and indebted governments via multiple rescue programmes.’
The article led to consternation on the markets and a drop in banking share prices throughout Europe.
‘Investors were concerned about the spill-over effect,’ analyst Cor Kluis of Rabobank told the Financieele Dagblad. ‘What will savers in Greece, Portugal, Ireland and Spain do now they know this?’
Several hours later, the Eurogroup issued a two-line statement which said: ‘Cyprus is a specific case with exceptional challenges which required the bail-out measures we agreed upon yesterday. Macro-economic adjustment programmes are tailor-made to the situation of the country concerned and no models or templates are used.’
The about-turn led FT columnist Paul Murphy to state it is about time ‘careless talk’ cost Dijsselbloem his job. ‘We could blame all this on too much coffee and not enough sleep, except that Mr Dijsselbloem has a little too much form on this front. And he’s only been in the Eurogroup job since January,’ Murphy wrote.
Dutch MPs were also critical of the minister, who was earlier under fire for the botched initial attempt to bail out Cyprus by making small savers pay.
Dijsselbloem went on to appear on the Pauw & Witteman late night talk show on Dutch television on Monday evening. The minister said he did not know the English word ‘template’ so could not have used it [in the interview].
The FT had described the Cyprus approach as a ‘new line’ while Reuters said it is a ‘new template for resolving eurozone banking problems’ but neither quoted the minister as actually using the word.
Dijsselbloem went on to defend his position, saying the problems have to be be given back to the banks and the taxpayer should be involved as a last resort.
This means ‘to where the risks were taken and problems were caused’, the minister said. ‘Cyprus falls into this framework but is in an extreme position and that is why we have gone to extremes and involved account holders with over €100,000.’
Dijsselbloem did, however, say he had not made the link between Cyprus and other small countries with large financial sectors. ‘I expressly did not do that,’ he told the show.
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