EU bosses have been forced to step in to deny that savings accounts in Spain, Italy and other European countries could be raided if needed to preserve Europe’s single currency.
It came after the Dutch chairman of the Euro group claimed that the so-called ‘Cyprus solution’ could be used elsewhere to prop up failing banks.
While he later insisted that he had been misunderstood, Jeroen Dijsselbloem told the Financial Times that the involvement of shareholders, creditors and large customers in the Cyprus bailout deal could become a model for the future.
The policy had naturally alarmed hundreds of thousands of British expats living in Spain and elsewhere in Europe, who have transferred their savings to European banks.
Dijsselbloem said: “If there is a risk in a bank, our first question should be ‘Okay, what are you in the bank going to do about that? What can you do to recapitalise yourself?
“If the bank can’t do it, then we’ll talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders.”
However, the Dutch finance minister tried to row back from his comments by insisting that ‘Cyprus is a specific case’.
His comments were also described as ‘wrong,’ by European Central Bank executive board member Benoit Coeure.
The European Commission likewise rushed to assure Europeans that the involvement of large depositors and creditors in the bailout of Cypriot banks was in no way a model for the future.
“The Cyprus case is unique for several reasons,” said Michel Barnier.