It is up to the Cypriot government to decide the structure of a levy on depositors in its banks, but its contribution to the bailout must amount to 5.8 billion euros, European Central Bank board member Joerg Asmussen said on Monday.
Under a 10 billion euro rescue agreed in the early hours of Saturday in Brussels, savers with deposits in Cypriot banks below 100,000 euros would be hit with a 6.7 percent levy, while those above that threshold would take a 9.9 percent hit.
Continue Reading Below
Cyprus delayed a parliamentary vote on the deal until Tuesday, giving the Nicosia government time to build support for it by softening the blow to smaller savers, tilting more of the levy towards those with larger deposits.
"It is the Cypriot government's reform program. It is up to the government alone to decide if it wants to change the structure of the ... contribution (from) the banking sector," Asmussen told reporters on the sidelines of a conference in Berlin.
"The important thing is that the financial contribution of 5.8 billion euros remains. It is of course in the hands of the Cypriot government and its parliament to decide on the structure."
The Cyprus deal sent shockwaves through financial markets on Monday, with shares, the euro and the bonds of southern euro zone countries sliding.
Asmussen stressed that Cypriot banks had access to emergency liquidity through the Cypriot central bank and would regain access to normal liquidity operations of the euro system again as soon as the program was approved and banks recapitalized.
"I want to stress that in the current situation, Cypriot banks have access to emergency liquidity of the central bank of Cyprus according to the rules of the euro system," he said.
"The liquidity provision is generally there for all banks of the euro system. We make liquidity available for solvent banks," Asmussen added.
German Finance Minister Wolfgang Schaeuble said on Sunday that it had been the Cypriot government, the European Commission and the ECB that had pushed for the bank levy solution.
But Asmussen said the deal agreed on Saturday was the result of negotiations between the parties.
"I want to emphasize that it wasn't the ECB that pushed for this special structure of the contribution which has now been chosen. It was the result of negotiations in Brussels," he said.
"We provided technical help with the calculations, as always, but we didn't insist on this special structure."
Asmussen said there was no easy or risk-free decision in dealing with Cyprus's heavily indebted banking sector, and he stressed the importance of the tiny Mediterranean island for the wider euro zone.
"We have always said the country is systemically relevant for the euro zone as a whole. There could be contagion, especially via the banking system to Greece and possible contagion for countries which are currently getting towards the end of their programs like Ireland and Portugal," he said.
Cyprus accounts for just 0.2 percent of euro zone gross domestic product.
Asked later if the deal might hit depositors in other countries, Asmussen said Cyprus was a special case.
"I do believe that the situation of Cyprus and the Cypriot banking sector is indeed unique," Asmussen said during a panel discussion in Berlin.
(Writing by Annika Breidthardt and Gareth Jones, editing by Noah Barkin and Hugh Lawson)