By Sakari Suoninen
FRANKFURT, April 4 The European Central Bank put
the blame for initial market turmoil over Cyprus's bailout
squarely on the island's government on Thursday and pledged that
taxing depositors would not become normal procedure.
ECB President Mario Draghi said Cyprus's bailout was "no
template", a statement designed to ease market fears that bank
deposits would in future be fair game for international lenders
seeking to help struggling euro zone countries.
But he was also scathing about Cyprus's initial plan to
impose a levy on insured as well as uninsured bank depositors.
"That was not smart, to say the least, and was quickly
corrected (by euro zone finance ministers)," he said.
Draghi said the finance ministers and the International
Monetary Fund had wanted Cyprus to help pay for its 10 billion
euros ($12.84 billion) with a levy on wealthy depositors only.
Cyprus, however, had initially also sought to charge those
with 100,000 euros or less even though they had a bank deposit
guarantee. The move triggered a wave of concern in financial
markets, fearing that investors elsewhere would be unnerved and
start a bank run.
Draghi said depositors with guarantees should be sacrosanct,
but that it was best not to touch any depositors if possible.
"You have a pecking order, ideally insured depositors should
be the very last category to be touched. The (European)
Commission draft directive (on banking) foresees exactly this.
"There isn't actually a specific distinction between
categories of bondholders and uninsured depositors in the draft
directive. But basically the point is that you, if you can,
don't touch uninsured depositors," Draghi said.
He also said it would be of no help to Cyprus if it left the
euro zone, as some have floated.
"What was wrong with Cyprus's economy doesn't stop being
wrong if they are outside the euro," he said.
"So the fiscal budget stabilisation, consolidation, the
restructuring of the banking system would be needed anyway,
whether you are in or out. To be out doesn't preserve the
country from the need for action."
Draghi also sought to soothe concerns that charging
depositors - called a "bail in" - would now be imposed on other
Dutch Finance Minister Jeroen Dijsselbloem, who heads the
Eurogroup of euro zone finance ministers, caused a stir in March
when he told Reuters that the Cyprus bailout, including
depositor levies, could be replicated in future.
Draghi insisted this was not the case.
"Cyprus is no template," he said. "I am absolutely sure that
the chairman of the Eurogroup has been misunderstood."