German Chancellor Angela Merkel lauded the bailout agreement for Cyprus as lawmakers in her coalition embraced the package that will go to a vote in parliament in the coming weeks.
“I am very satisfied that it was possible to reach a solution last night, that is to avoid the country’s insolvency,” Merkel said in a speech today in the Bavarian town of Langenfeld. The deal places Cyprus on a “new path” and the 17-member euro area will show its solidarity “in the years ahead.”
Finance Minister Wolfgang Schaeuble briefed parliamentary caucus leaders in the lower chamber, or Bundestag, today after returning from Brussels. Euro finance ministers in the early hours of this morning agreed on a 10 billion-euro ($13 billion) package for Cyprus in exchange for a scaled-back banking system.
Leading German legislators will decide whether the Bundestag vote will take place this week or in the third week of April, Schaeuble told reporters.
The agreement goes a “long way” toward satisfying the demands of German parliamentarians, though it must be examined in detail, Christian Democratic lawmaker Norbert Barthle said in an interview today.
“The result of the negotiations correspond for the greater part with our original proposals for a bail-in,” or imposed losses, said Barthle, a Merkel ally and budget expert in her Christian Democratic Union party.
In late-night negotiations, Cypriot President Nicos Anastasiades agreed to shut the country’s second-largest bank and impose a levy of as much as 40 percent on deposits of more than 100,000 euros at Bank of Cyprus Plc, the largest lender.
The No. 2 bank, Cyprus Popular Bank Pcl, will be wound down and its viable assets transferred to the larger bank.
“The solution appears acceptable as it doesn’t increase the contribution of the euro group and is a partial bail-in that treats small savers differently from bank owners and bond creditors,” Otto Fricke, a lawmaker for Merkel’s Free Democratic coalition partner, said in an interview.
Germany’s opposition Social Democrats also embraced the agreement, Deutsche Presse-Agentur cited SPD caucus leader Frank-Walter Steinmeier as saying. He said a vote before the March 31 Easter holiday wasn’t necessary.
The burden of rescuing banks shouldn’t fall to taxpayers, “but rather the banks to save themselves,” said Merkel, who’s seeking a third term in national elections scheduled for Sept. 22.
The single currency must hold together, she said. “That is the nature of our European rescue policy of holding together.”