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UPDATE 1-Finland: Cyprus deal must put burden on top depositors
March 22, 2013 / 6:41 PM / 5 years ago

UPDATE 1-Finland: Cyprus deal must put burden on top depositors

(Recasts with prime minister’s comments)

By Ritsuko Ando

SAARISELKA, Finland, March 22 (Reuters) - Finnish Prime Minister Jyrki Katainen said on Friday it was “fair and right” that a solution to the Cyprus crisis should include a greater burden on holders of big bank deposits.

“In a normal market economy an investor always has a risk of losing money,” he told reporters on the sidelines of a meeting of European policymakers in Lapland, as markets awaited a Cyprus deal to raise billions of euros and secure a European Union bailout.

“That’s why I think it’s fair and right, and also part of a normal market economy, that owners of a bank, investors, and biggest depositors - who can be seen as investors - take their own responsibility, in one way or another.”

Katainen criticised the earlier plan by Cyprus leaders to tax small savers to protect bigger depositors, many of them Russian.

“We cannot afford to lose confidence from depositors, and that’s why Finland has never asked or demanded that small depositors pay the price,” he said.

Finland is one of the few remaining countries in the euro zone to be rated triple-A by all major credit rating agencies, thanks to tight fiscal policies.

While the government is led by Katainen’s conservative and pro-euro National Coalition party, the popularity of the anti-euro opposition, the Finns Party, is seen forcing leaders to take a tough stance on bailout terms.

The small Nordic economy endured a wave of bankruptcies and years of austerity after its early 1990s banking crisis, and on Thursday announced it would trim an additional 600 million euros ($777 million) from the state budget over the next few years to bolster its finances.

Finland’s Minister for European Affairs Alexander Stubb, also a conservative, said the government had no choice but to take a hard line on Cyprus. Finland’s portion of the loan would amount to 200-300 million euros.

“It’s not like we want to be mean,” he told Reuters. “We have just done far-reaching budget cuts and tax increases in our own budget, so how can we explain to our voters that we are doing a readjustment of 600 million and at the same time giving a loan to Cyprus for 2-300 million which is not conditional? We just can’t do that.”

He added he was confident that Cyprus will find a bailout deal before a Monday deadline set by the European Central Bank when it will sever cash to Cypriot banks if no bailout programme is agreed.

“Why am I optimistic? Because there are no other options,” he said. “They’ll find a solution, if not today then over the weekend.” (Editing by Ron Askew; editing by Ron Askew)

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