‘Cyprus does not set a precedent’

Cyprus’s decision to force losses on bank deposits doesn’t set a precedent for the rest of the euro region, EU president Herman Van Rompuy said in an interview with De Zondag.

Mr Van Rompuy was cited as saying that eurozone finance ministers made an “unfortunate decision” in approving an initial plan to tax bank accounts below the EU-insured limit of €100,000.

That plan, which was rejected by the Cypriot parliament, and a subsequent agreement to force losses on creditors of the country’s two largest banks, won’t threaten other nations, he said in an interview with the Belgian newspaper.

“Cyprus is a special case, because of the size, structure, and characteristics of its financial sector,” Mr Van Rompuy said.

He reiterated that insured depositors are protected under EU law.

Cyprus’s decision to make uninsured depositors and senior creditors share in the cost of the country’s €10bn bailout roiled markets last week. The measures were accompanied by capital controls to avert a bank run.

Mr Van Rompuy defended Cyprus’s agreement with EU authorities and the IMF.

“The plan is the only possible way to reduce the costs for the European taxpayer while at the same time make Cyprus debt sustainable,” he said.

Mr Van Rompuy said the eurozone is showing signs of being able to overcome its sovereign debt crisis and recession.

“It’s our estimate that by the end of this year, beginning of next year, we will return to positive growth,” he told the newspaper.

According to Reuters, ECB president Mario Draghi phoned Italian president Giorgio Napolitano after media reports that the 87-year-old head of state was planning to resign early to clear the way for new elections.

Mr Napolitano pledged on Saturday that he would stay in office until the end of his term on May 15 following reports that he planned to step down to break the deadlock created by last month’s election, which left no party able to form a new government.

The move would be needed to allow Italy to return to the polls before the summer holiday period, because of constitutional provisions which prevent a president from dissolving parliament in the final months of his mandate.

The main newspapers yesterday all reported that Mr Draghi had called Mr Napolitano to express concern that his resignation would leave Italy without leadership at a time of mounting tension in financial markets, exacerbated by the bank crisis in Cyprus.

— Bloomberg

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