BERLIN – German Finance Minister Wolfgang Schaeuble said on Tuesday the government and parliament of Cyprus and the people who deposited money there had to take responsibility for the solvency problems that had made a bailout necessary.
"The responsibility does not lie with the German government nor with other European member states, it is Cyprus' decision," Schaeuble told German radio.
Germany and the International Monetary Fund have long believed an international rescue for Cyprus had to be a so-called "bail-in" with the participation of private depositors in the island's oversized banking system, the minister said.
The announcement that Cyprus would impose a levy on bank accounts as part of a 10 billion euro ($13 billion) bailout prompted turmoil on financial markets.
Cypriot and euro zone officials have sought to soften the initially proposed levy of 6.75 percent on depositors of up to 100,000 euros and 9.9 percent above 100,000 to ease the burden on small savers.
"The business model in Cyprus has led to the country being no longer solvent and it is very clear that this can not be paid exclusively by European taxpayers," said Schaeuble. "How Cyprus does this is for Cyprus to decide, not the euro zone."
"The government and parliament of Cyprus must decide on that today," Schaeuble said.
He said it was misleading to talk about "savers" being hit because such a large proportion of account holders were foreign - many of them Russian - with deposits of much more than 100,000 euros who chose Cyprus because of its low taxes and regulation.
"Whoever deposits their money in a country because it will be taxed less and controlled less runs a risks when the banks in these countries are no longer solvent. That is what happened in Iceland and in Ireland some years ago. European taxpayers should not be made responsible for this risk," said Schaeuble.
(Reporting by Stephen Brown, editing by Gareth Jones)