The Cypriot crisis has been neuralgic in Germany ever since a leaked intelligence report alleged that the island is a haven for Russian organized crime.
telegraph.co.uk / By Ambrose Evans-Pritchard / March 5, 2013, 7:22PM GMT
Cypriot sources say lenders haemorrhaged €1bn in deposits over the first two weeks of February, heightening fears that mere talk of “haircuts” is deepening the banking crisis as rescue talks drag on between the EU-IMF Troika and the island’s new leaders. The Central Bank of Cyprus reported deposit losses of €1.7bn in January.
Brussels has warned against haircuts for depositors, a drastic move avoided in bail-outs for Greece, Ireland, and Portugal.
Cypriot finance minister Michael Sarris told eurozone colleagues on Monday night that such action would shatter confidence and set off a fresh spasm of the EMU debt crisis.
“There is no way we can entertain the idea of any kind of haircut to any kind of deposits. This would be an accident in the euro zone not caused by markets, but a self- inflicted wound, a self-inflicted catastrophe, not only for Cyprus, but for the euro zone and perhaps even beyond.”
Yet politicians in Germany and Europe’s AAA core have yet to be convinced that the tiny island with 1.1m people and a GDP of €17bn poses any systemic risk to the currency bloc. Eurogroup chief Jeroen Dijsselbloem refused to rule out losses for depositors, saying the matter would be settled later this month.