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Cyprus rescue plan is new template

Monday, March 25, 2013 - 01:55

March 25 - A rescue programme for Cyprus represents a new template for resolving euro zone banking problems, says the head of the region's finance ministers. Sonia Legg reports on why his comments shock markets.

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So banks in Cyprus will reopen on Tuesday. But not all of them - the two main ones at the centre of the crisis won't open their doors again until Mar 28. A bank run is a distinct possibility, especially after comments by Eurogroup Head Jeroen Dijsselbloem. Just hours after a late night session to sort the crisis in Cyprus he told Reuters the rescue programme represents a new template for resolving euro zone banking problems He said: "If the bank can't do it, then we'll talk to the shareholders and the bondholders, we'll ask them to contribute to recapitalising the bank, and if necessary the uninsured deposit holders." That's what will happen at Bank of Cyprus. Uninsured depositors will have their accounts frozen while the bank is restructured and recapitalised. Some of that capital will come from accounts with more than 100,000 euros. The agreement is a radical departure from euro zone policy. For the past three years taxpayers have been expected to resolve problem banks and indebted governments via rescue programmes. Dijsselbloem said recent financial calm had made it possible for them to make the change. He conceded it could unsettle them again and it did - an early market rally was reversed partly thanks to his comments. But some may welcome a more uniform approach. German MEP Wolf Klinz says the EU's been wrong to deal with each rescue on an individual basis. (SOUNDBITE) (English) WOLF KLINZ, GERMAN MEP, SAYING: "There is not a single common approach - every approach is different and even though I accept that each and every situation is somewhat different I think there should be some sort of clear elements to a rescue approach that should be standard." Cyprus is unlikely to be the last euro zone country in crisis. Klinz said Slovenia could be next. He just hopes the new approach won't have to be applied to likes of Spain, Italy or even France.

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Cyprus rescue plan is new template

Monday, March 25, 2013 - 01:55