BRUSSELS, March 19 Guarantees on deposits in the
European Union are only there if a bank completely collapses,
and does not protect from fiscal steps decided by parliaments,
the European Commission said on Tuesday, defending a decision to
impose a levy in Cyprus.
The euro zone's demand at the weekend that Cyprus place the
levy on bank accounts as part of an emergence financial rescue
has created a backlash in Cyprus and prompted many Europeans to
accuse Brussels of disrespect for its own rules.
EU law guarantees deposits up to 100,000 euros per customer,
per bank. But Commission spokesman Simon O'Connor said those
guarantees only existed: "in the event of a bank failure."
"In this case, we are not talking about such a situation, we
are talking about a one-off levy which will be applied as a
fiscal measure, to all bank accounts in Cyprus," he told a
regular briefing in Brussels.
From the streets of Cyprus and on Twitter to radio shows in
Belgium, millions of Europeans have protested at what they see
as a blatant disregard for ordinary savers, which the Commission
said was engendered by confusion over EU rules.
"That is the distinction that we need to make," O'Connor
Stunned by the backlash and fearing rejection by Cypriot
lawmakers, euro zone finance ministers urged Nicosia on Monday
to avoid hitting accounts below 100,000 euros, and instead
increase the levy on big accounts, which are unprotected by the
state deposit-insurance system.
The European Union and International Monetary Fund are
demanding Cyprus raise 5.8 billion euros to secure its bailout.
That is needed to rescue its financial sector, and the
international lenders initially agreed on Saturday that Nicosia
was to impose a 9.9 percent one-off levy on deposits held in
Cyprus above 100,000 euros and a levy of 6.75 percent on smaller
A revised draft bill seen by Reuters would exempt savings
under 20,000 euros from the 6.75 percent levy on deposits of
less than 100,000 euros. The government has not explained how it
would fill the funding gap this would create.