Euro Area to Defend Deposits After Cyprus Levy, Frieden Says

Euro-area finance ministers will “do whatever it takes” to protect bank accounts after their “unique” decision on a deposit tax in Cyprus as part of a rescue package, Luxembourg Finance Minister Luc Frieden said.

“Whatever it will take today, tomorrow, in the days to come, we will make sure that deposits in Europe are safe,” Frieden said in an interview with David Tweed on Bloomberg Television today. “Although this is far from being a perfect decision,” the Cyprus deal “cannot be seen as destroying the confidence that people should have in the European financial sector,” he said.

Frieden’s comments echoed those of his Dutch counterpart, Jeroen Dijsselbloem, and others. Dijsselbloem, head of the group of euro-area finance ministers, said today that a bank-account levy “won’t happen in other countries because their banking industries aren’t as unbalanced as in Cyprus.” He was referring to the size of Cyprus’s financial sector compared with gross domestic product.

Euro-area finance ministers last week agreed to a tax on Cypriot bank deposits as officials unveiled a 10 billion-euro ($13 billion) rescue for the country’s government and banks. The levy is intended to raise 5.8 billion euros.

“This is a unique Cyprus solution,” Frieden said, and it “cannot be simply copied to other situation.”

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