Cyprus’s new finance minister on Friday ruled out a haircut, or imposed losses, on bank deposits to ease a financial bailout from international lenders, now stalled amid worries about debt sustainability.
“Really and categorically – and this doesn’t only apply in the case of Cyprus but for the world over and the eurozone – there really couldn’t be a more stupid idea,” Michael Sarris, who took over his post on Friday, told reporters. Sarris, a widely respected economist, was the first appointment of new Cypriot President Nikos Anastasiades, who won presidential elections last Sunday on a platform of constructively attempting to seek a deal with lenders. Scenarios have been floated in recent weeks over how Cyprus could ever afford to repay a bailout bill which could reach 17 billion euros, almost the same size as its economy.
One of the reported options under discussion is for those holding deposits in excess of 100,000 euros in Cypriot banks to take a loss if their bank is wound down, in order to scale down the oversized Cypriot financial sector. Cyprus has been adamant that idea will never fly.
“I really don’t know where it is coming from,” said Sarris, adding that the speculation was linked to attempts to make debt sustainable, but said there were other ways to handle the bailout bill.