German Chancellor Angela Merkel’s government was pressed to reiterate a 4 1/2-year-old pledge guaranteeing bank deposits as concern rippled across Europe at a decision to fund Cyprus’s bailout by taxing the island’s savers.
“It’s the nature of a guarantee that it remains valid,” Steffen Seibert, Merkel’s chief spokesman, told reporters in Berlin today when asked whether the pledge Merkel made in 2008 with her then-finance minister, Peer Steinbrueck, still held.
Merkel’s government, the biggest contributor to euro-area bailouts during the debt crisis that emanated from Greece, backs the 5.8 billion-euro ($7.6 billion) levy on Cypriot bank account holders. At the same time, it is up to the country’s government to determine how debt sustainability is achieved, Seibert said.
The bailout was announced early on March 16 after a meeting of euro-area finance ministers. Cyprus needs to vote the package through its parliament to secure another 10 billion euros in rescue loans.
With this deal, “the responsible people are partly included and not only the taxpayers in other countries,” Merkel said two days ago at a meeting of her Christian Democratic Union party in her electoral district in northern Germany, according to remarks broadcast on ARD television. “And I think it’s right that we went down that road.”
As stocks dropped and the euro weakened to its lowest level this year, Seibert moved to reassure investors that Cyprus, with a bloated banking sector, represented a “special case.”
“These are situations that are very specific to the Cypriot problem,” Seibert said. That’s why “no one has to spread concern among savers or depositors in other European countries or Germany.”