Berlin - Leading figures from across the German political spectrum criticised Europe's bailout deal for Cyprus on Monday, describing plans to impose a levy on small savers in the Mediterranean island's banks as a major mistake.
Finance Minister Wolfgang Schaeuble, who represented Germany in the rescue talks in Brussels, tried to deflect blame for the agreement however, saying it was “not the creation” of the German government and that he was open to changes.
Under the 10 billion euro rescue agreed in the early morning hours of Saturday, savers with deposits below 100,000 euros would be hit with a 6.7 percent levy, while those above that threshold would take a 9.9 percent loss.
The deal sent the euro, stock markets and the bonds of southern euro zone members sharply lower on Monday morning. Amid the backlash, Cypriot authorities were considering changes to reduce the burden on smaller savers.
“Small savers cannot be made responsible for the debt crisis,” Daniel Bahr, a member of the ruling Free Democrats (FDP) and health minister in Chancellor Angela Merkel's government, told Reuters. “Mr. Schaeuble is going to have to move on this.”
Stanislaw Tillich and Volker Bouffier, influential premiers of the states of Saxony and Hesse and members of Merkel's Christian Democrats (CDU), both urged changes to the deal.
And opposition parties, who face a struggle to unseat the popular Merkel in a September election, were withering in their criticism.
Carsten Schneider, a budget policy expert for the Social Democrats (SPD), said the decision to hit savers with funds under 100,000 euros who would normally benefit from a deposit guarantee threatened to “undermine trust in the whole euro zone.”
“They are creating uncertainty for all investors, even those in Germany,” Schneider told Reuters on the sidelines of a conference in Berlin.
Juergen Trittin, parliamentary leader for the Greens, told German television: “Why don't we take 15 percent from those with lots of money and completely exclude those with deposits under 25,000 euros from the levy?”
Germany's lower house of parliament must approve the bailout deal for it to go ahead. Chancellor Merkel has a majority in the Bundestag but has counted on the support of the opposition in past bailout votes.
Speaking on Sunday evening on German public television, Schaeuble said he had been prepared to respect the deposit guarantee for accounts up to 100,000 euros, but had faced resistance from the Cypriot government, the European Commission and the European Central Bank.
ECB board member Joerg Asmussen, speaking in Berlin on Monday, appeared to contradict Schaeuble's account.
“I want to emphasise that it wasn't the ECB that pushed for this special structure of the contribution which has now been chosen. It was the result of negotiations in Brussels,” he said.
“We provided technical help with the calculations, as always, but we didn't insist on this special structure.”
A parliamentary official in Nicosia, who requested anonymity, said the Cypriot government was now suggesting that savers with deposits up to 20,000 euros be exempted from the levy altogether.
But it was unclear how it would fill the gap that would result from that move. German and European officials made clear that if changes were made, Cyprus would still have to come up with a 5.8 billion euro contribution from its banks for the bailout deal to work. - Reuters