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| Cyprus crisis: the six parties who took three months to end up nowhere | Cyprus crisis: the six parties who took three months to end up nowhere |
| (17 days later) | |
| The deadlock over how to bail out Cyprus's banks and economy came about because the six main actors had irreconcilable demands and aims | The deadlock over how to bail out Cyprus's banks and economy came about because the six main actors had irreconcilable demands and aims |
| Germany | Germany |
| Wolfgang Schäuble, highly experienced finance minister, has been identified by senior Cypriot officials as the most powerful hawk at the weekend meeting, insisting on huge confiscations from wealthy savers that could have triggered mass capital flight and brought the Cypriot banks down. Berlin has taken the toughest line over more than three years of eurozone crisis and Angela Merkel is keen to avoid footing too much of the bailout bill just before running for a third term. Also, the perception that German taxpayers' money was being lent to secure the wealth of Russian oligarchs in Cypriot banks was hard to swallow. Merkel had been hoping for a quiet time in the eurozone in the runup to the September elections. That looks like a miscalculation. | Wolfgang Schäuble, highly experienced finance minister, has been identified by senior Cypriot officials as the most powerful hawk at the weekend meeting, insisting on huge confiscations from wealthy savers that could have triggered mass capital flight and brought the Cypriot banks down. Berlin has taken the toughest line over more than three years of eurozone crisis and Angela Merkel is keen to avoid footing too much of the bailout bill just before running for a third term. Also, the perception that German taxpayers' money was being lent to secure the wealth of Russian oligarchs in Cypriot banks was hard to swallow. Merkel had been hoping for a quiet time in the eurozone in the runup to the September elections. That looks like a miscalculation. |
| Russia | Russia |
| Was not at the table in Brussels early on Saturday. But with the eurozone bailout blocked, it assumes a bigger role. An EU-Russia summit is likely to hear Moscow make tough demands of the Europeans, given the Russian money and business at stake in Cyprus. The Russians are furious that they have been given no say in decisions that would have expropriated an estimated €2bn (£1.7bn) of Russian money. They could use the crisis as leverage to demand a say in the negotiations, bringing Russia into the eurozone's politics and finance for the first time. | Was not at the table in Brussels early on Saturday. But with the eurozone bailout blocked, it assumes a bigger role. An EU-Russia summit is likely to hear Moscow make tough demands of the Europeans, given the Russian money and business at stake in Cyprus. The Russians are furious that they have been given no say in decisions that would have expropriated an estimated €2bn (£1.7bn) of Russian money. They could use the crisis as leverage to demand a say in the negotiations, bringing Russia into the eurozone's politics and finance for the first time. |
| International Monetary Fund | International Monetary Fund |
| Christine Lagarde, the International Monetary Fund chief, is arguably the only player who has acted consistently, whether or not you agree with the policies espoused. The deadlock and the furore over taxing small savers has triggered an unseemly blame game with everyone denying responsibility for the decision, except the IMF, which called the proposed deal "fair burden-sharing". The IMF's central demand was to keep the bailout to a level that would not raise Cyprus government debt beyond what is deemed sustainable. That meant €10bn when Cyprus needed a bit more than €17bn. Hence the tax on savers. | Christine Lagarde, the International Monetary Fund chief, is arguably the only player who has acted consistently, whether or not you agree with the policies espoused. The deadlock and the furore over taxing small savers has triggered an unseemly blame game with everyone denying responsibility for the decision, except the IMF, which called the proposed deal "fair burden-sharing". The IMF's central demand was to keep the bailout to a level that would not raise Cyprus government debt beyond what is deemed sustainable. That meant €10bn when Cyprus needed a bit more than €17bn. Hence the tax on savers. |
| European commission | European commission |
| Alongside the German and IMF hawks, the European commission, relatively speaking, was a soft touch, viewing the prescriptions from Berlin and Washington as medicine that could kill rather than cure the patient. Olli Rehn, the relevant commissioner, did suggest taxing ordinary savers but sought to minimise the levy. He was overpowered by the Germans and their allies, the Finns, Dutch and Slovaks. | Alongside the German and IMF hawks, the European commission, relatively speaking, was a soft touch, viewing the prescriptions from Berlin and Washington as medicine that could kill rather than cure the patient. Olli Rehn, the relevant commissioner, did suggest taxing ordinary savers but sought to minimise the levy. He was overpowered by the Germans and their allies, the Finns, Dutch and Slovaks. |
| European Central Bank | European Central Bank |
| Jörg Asmussen, of the ECB executive and Schäuble's former deputy at the German finance ministry, acted as a crucial go-between. The pressure on the Cypriots reached a turning point when he warned that the ECB would withdraw emergency liquidity support within days to Cyprus's second-biggest bank if no deal was struck. Such a move, which could still happen, would also trigger the collapse of the Cypriot system with an unforeseeable impact on the rest of the eurozone. It's a high-stakes game to see who blinks first. The Cypriot government blinked on Saturday morning. The Cypriot parliament balked on Tuesday – and the ECB also then blinked. Unresolved. | Jörg Asmussen, of the ECB executive and Schäuble's former deputy at the German finance ministry, acted as a crucial go-between. The pressure on the Cypriots reached a turning point when he warned that the ECB would withdraw emergency liquidity support within days to Cyprus's second-biggest bank if no deal was struck. Such a move, which could still happen, would also trigger the collapse of the Cypriot system with an unforeseeable impact on the rest of the eurozone. It's a high-stakes game to see who blinks first. The Cypriot government blinked on Saturday morning. The Cypriot parliament balked on Tuesday – and the ECB also then blinked. Unresolved. |
| Cyprus | Cyprus |
| Nicos Anastasiades, president for just over a fortnight, has had the debut from hell. His predecessor, Dimitris Christofias, a pro-Russian, Moscow-educated communist, had stalled for months. Anastasiades has inherited more than the pro-Russian bias in Cypriot finance. Reluctant to contemplate a Russian capital flight from the island's banks and business, he insisted the savers' tax on deposits over €100,000 could not be higher than 10%, eventually settling on the symbolic rate of 9.9%. That meant smaller, mainly local savers had to make up the difference via a 6.75% hit on their deposits. Now he will have to come up with a new set of figures that he can sell to the eurozone as well as his own parliament if Cyprus, and possibly the euro, is to be saved. | Nicos Anastasiades, president for just over a fortnight, has had the debut from hell. His predecessor, Dimitris Christofias, a pro-Russian, Moscow-educated communist, had stalled for months. Anastasiades has inherited more than the pro-Russian bias in Cypriot finance. Reluctant to contemplate a Russian capital flight from the island's banks and business, he insisted the savers' tax on deposits over €100,000 could not be higher than 10%, eventually settling on the symbolic rate of 9.9%. That meant smaller, mainly local savers had to make up the difference via a 6.75% hit on their deposits. Now he will have to come up with a new set of figures that he can sell to the eurozone as well as his own parliament if Cyprus, and possibly the euro, is to be saved. |
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