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Cyprus 'model' a one-off?

March 26, 2013

European officials have sought to allay fears that the Cyprus bailout could be a model for future emergency packages. Meanwhile, Cyprus' central bank has appointed a new boss for the country’s largest commercial lender.

https://p.dw.com/p/184Ys
The National flag of Cyprus, in the capital Nicosia. (Photo: ANP XTRA LEX VAN) LIESHOUT
Landesflagge Zypern (Symbolfoto)Image: picture-alliance/ANP XTRA

European Commission and the European Central Bank representatives on Tuesday both appeared to contradict a message from Eurogroup head Jeroen Dijsselbloem that the Cyprus bailout would be a model for future bailouts.

Central bank official Benoit Coeure, who sits on the bank's six-member board, dismissed the idea outright.

Coeure said that Eurogroup head and Dutch Finance Minister Jeroen Dijsselbloem had been "wrong" because Cyprus, with its outsized financial sector, was an atypical case.

EU Leaders Upbeat After Cyprus Bailout

The eurozone and International Monetary Fund (IMF) on Monday agreed to a deal to give Cyprus some 10 billion euros ($13 billion). The deal stipulates that further funding should be raised via a levy on bank accounts of more than 100,000 euros at the countries two largest lenders.

"I do not see why we would use the same methods elsewhere," Coeure told the French radio station Europe 1. "The Cyprus experience is not a model for the rest of Europe because the situation had reached a level which cannot be compared with any other country."

Those views echoed comments by European Commission spokeswoman Chantal Hughes who said that the Cyprus solution wasn't a "perfect model or a model that should be used again in the same way."

Separate banks, separate plans

The current bailout now requires that the island's second largest bank, Laiki, be closed. The island nation's central bank on Monday appointed Andri Antoniades as special administrator for that task.

Meanwhile, the largest lender, Bank of Cyprus, will be recapitalized under the stewardship of administrator Dinos Christofides, who was appointed on Tuesday.

"The appointment of temporary special administrators at both banks aims to facilitate and complete the process of resolution and restructuring of Laiki Bank and Bank of Cyprus respectively," a statement from the central bank said on Tuesday.

All of Cyprus' banks stayed closed on Tuesday after a plan to reopen most of them had been postponed. Government spokesman Christos Stylianides said that both the central bank and the finance ministry were "working intensively" to ensure the reopening went ahead on Thursday.

Meanwhile, students and bank staff protested outside the presidential palace over the terms of the bailout. Journalists from the news agency Reuters estimated that up to 3,000 high school students took part in a show of opposition outside parliament, while some 200 Bank of Cyprus staff demonstrated it the lender's headquarters.

rc/kms (AFP, AP, dpa, Reuters)