Berlin presses Nicosia to produce alternative to bank levy proposal

Two big banks insolvent without ECB funding, says Wolfgang Schäuble

Berlin has said there is “no point crying over spilt milk” following the Cypriot rejection of an EU rescue proposal and pressed Nicosia yesterday to present an alternative.

With banks remaining closed yesterday after MPs rejected a bank levy proposal, German finance minister Wolfgang Schäuble said there was a “danger that they won’t be able to open the banks again at all” in Cyprus.

“Two big Cypriot banks are insolvent if there are no emergency funds from the European Central Bank,” he told German television. Emergency funding depends in turn, he said, on reaching agreement on burden-sharing.

'Not sustainable'
German chancellor Angela Merkel said she "respected" the parliamentary vote but was waiting for a new proposal from Cyprus to the troika.


“From a political point of view, I say that Cyprus needs a sustainable banking sector,” she said.

“Today’s banking sector is not sustainable.”

Asked if last Saturday’s agreement to spread the levy burden across all Cyprus savers was a mistake, Dr Merkel’s spokesman said: “One could have imagined other things.”

German foreign minister Guido Westerwelle said there was "no point crying over spilt milk".

“We need a new effort to tackle the problems and it’s up to Cyprus how it wants to restore a sustainable debt position,” said Mr Westerwelle.

The former leader of the Free Democrats (FDP) urged “balanced language” in the current situation and for everyone to “be careful with our emotions”.

'Manageable' exit
Hours earlier his party colleague Rainer Brüderle, leading the FDP's re-election campaign in September, said a Cypriot bankruptcy or euro zone exit was "not desired but . . . with the instruments we have today, would be manageable".

Austrian chancellor Werner Faymann said he "cannot rule anything out for Cyprus".

“Each country makes its own decision and no one will take that away from them,” said Mr Faymann to the APA agency.

With Germany entering election season, opposition politicians have attacked the government’s handling of the Cyprus situation.

Frank Walter Steinmeier, parliamentary leader of the opposition Social Democrats (SPD) noted how, within days, German pride at the weekend decision "which carried a German signature, that of Dr Merkel, is now one no one wants anything to do with".

Left Party politician Sahra Wagenknecht praised Cyprus for its tough negotiation stance to protect citizens' bank deposits but warned that it faced limited room for negotiation with Berlin in the months ahead.

“Above all in an election year, the German government doesn’t want to give the impression of wasting hard-earned taxpayer money,” she said.

Derek Scally

Derek Scally

Derek Scally is an Irish Times journalist based in Berlin