Portugal Finance Minister Fights Cyprus Bailout Template Remarks

By

Published March 26, 2013

| FOXBusiness

Dutch Finance Minister Jeroen Dijsselbloem’s remarks Monday that the Cyprus bank rescue could become a template for other financially unstable eurozone countries roiled European markets.

While Dijsselbloem backtracked on those remarks with his spokesperson telling FOX Business Cyprus is a "unique" situation, the damage to confidence in countries already receiving EU aide was already done.

In fact, a top financial leader in Portugal pushed back against Dijsselbloem's comments Tuesday.
Portugal Minister of State and Finance Vitor Gaspar said the Cyprus bailout plan would not be a welcomed template in Portugal. The nation has faced significant financial stress over the last decade and was part of the infamous PIIGS group of eurozone countries deemed particularly weak after the global recession.

Gaspar stressed the same rules need to be enforced throughout Europe to avoid a fragmented market.

“Not only [do] we apply the same rule book, we apply the same rule book using the same practices across the European Union,” Gaspar said in a speech at the Brookings Institute in Washington, D.C.

Gaspar divulged  issues like constraints on bank portfolios are actively discussed among European regulators and finance ministers. Adding, “in order to have a single market, that's exactly how it should be.”

The bailout agreement, reached late Sunday evening, will likely wipe out some bondholders and taxes large depositors with accounts of more than 100,000 euros ($130,000). Cyprus’ plan calls depositors to “bail-in” the country, a first in Europe's history. Cypriot banks remain closed until Thursday, fueling citizens’ anger and nervousness about the bank rescue .

“That precedence of deposit protection is precisely the precedence of protection that the Eurogroup favored,” Gaspar said.

As if things couldn’t get any worse for the island, ratings firms Fitch put Cyprus on negative watch Tuesday, saying the country's banking system could damage Europe's overall economy. Cyprus currently has a "B" rating with Fitch.ally unstable eurozone countries sent U.S. markets into the red.

While Dijsselbloem backtracked on those remarks with his spokesperson telling FOX Business Cyprus is a "unique" situation, the damage to confidence in countries already receiving EU aide was already done.

In fact, a top financial leader in Portugal pushed back against Dijsselbloem's comments Tuesday.

Portugal Minister of State and Finance Vitor Gaspar said the Cyprus bailout plan would not be a welcomed template in Portugal. The nation has faced significant financial stress during over the last decade and was part of the infamous PIIGS group of eurozone countries deemed particularly week after the global recession. 

Gaspar stressed the same rules needs to be enforced throughout Europe to avoid a fragmented market.

“Not only [do] we apply the same rule book, we apply the same rule book using the same practices across the European Union,” Gaspar said in a speech at the Brookings Institute in Washington, D.C.

Gaspar divulged  issues like constraints on bank portfolios are actively discussed among European regulators and finance ministers. Adding, “in order to have a single market, that's exactly how it should be.”

The bailout agreement, reached late Sunday evening, wipes out some bondholders and taxes large depositors with accounts of more than 100,000 euros. Cyprus’ plan calls depositors to “bail-in” the country, a first in Europe's history. National banks remain closed until Thursday, fueling citizens’ anger and nervousness about the bank rescue .

“That precedence of deposit protection is precisely the precedence of protection that the Eurogroup favored,” Gaspar said.

As if things couldn’t get any worse for the island, ratings firms Fitch put Cyprus on negative watch Tuesday, saying the country's banking system could damage Europe's overall economy. Cyprus currently has a B rating with Fitch.

URL

http://www.foxbusiness.com/markets/2013/03/26/portugal-finance-minister-fights-cyprus-bailout-template-remarks/