Eurogroup Chief Takes Some Blame for Cyprus Crisis

The Dutch finance minister, who announced a tax on Cypriot depositors, almost suggested as much on Thursday. Under a barrage of questions from puzzled and profile-seeking lawmakers in the European Parliament, he accepted blame for agreeing to the controversial tax.

The decision to impose the levy on small depositors “was not stopped by me because it was a compromise which brought together the different interests and the different goals that we share,” said Jeroen Dijsselbloem, president of the group of 17 euro zone finance ministers. “As the Eurogroup president, I will take responsibility.” But he added that the levy was the result of “a joint decision.”

“Whether we are incompetent or not, I’ll leave up to you to judge,” he told lawmakers in a scheduled hearing that turned into an accounting for the turmoil after the announcement last weekend, which spooked savers by taxing their deposits and ignited new doubts about the viability of the euro currency.

Mr. Dijsselbloem conceded that he should have “communicated more right from the start” on why the levy — particularly on deposits under €100,000, or $130,000 — should not be seen as a threat to savers across Europe, and he insisted that there had not been “a huge loss of confidence” in a Union-wide rule that guarantees deposits up to €100,000.

As the Cypriot Parliament, which rejected the weekend bailout package on Tuesday night, prepared to vote on fresh proposals Thursday, Mr. Dijsselbloem said that a levy on deposits was “inevitable” in order to help cover the costs of a bailout, but that a revised arrangement should put a far greater burden on wealthier depositors.

Mr. Dijsselbloem, 46, took over just two months ago as chair of the euro zone group from Jean-Claude Juncker, the Luxembourg prime minister and a seasoned player of European politics, who had held the post since 2005. He cuts a youthful figure among the graying cadres who keep the machinery of the European Union ticking over.

Dutch officials characterize Mr. Dijsselbloem as a gutsy and gracious politician, and he remained consistently cool under sustained attack on Thursday. But he has little experience at top levels of government or European affairs, having assumed the finance portfolio, his first Dutch cabinet post, late last year.

Mr. Dijsselbloem, whose Eurogroup term lasts two and a half years, immediately brought a speedier metabolism to the group by announcing meetings on his Twitter account and calling ministers to Brussels earlier in the day with the goal of ending meetings earlier.

So far, the results are mixed.

The decision on the levy was announced after what participants characterized as a rancorous and chaotic 10-hour meeting that also involved the European Central Bank and International Monetary Fund — two members of the so-called troika that includes the European Commission and helps determine the terms of euro zone bailouts.

Sharon Bowles, a Briton who leads the Economic and Monetary Committee at the European Parliament and introduced Mr. Dijsselbloem on Thursday, said she didn’t want to go “too much on a witch hunt,” but demanded to know how plans to sting small depositors had gotten so far.

“I know that you can get around it calling it a wealth tax or a levy or whatever,” said Ms. Bowles. But many citizens across the Union now had “a lot of concern” and wanted to know, “Is this a new tool in the tool box, are they safe, and what is to be expected?”

Ms. Bowles suggested that Mr. Dijsselbloem’s presentation had been ham-fisted and should have included “more sensitivity” to concerns about whether the €100,000 deposit guarantee was still valid. She noted that Mr. Dijsselbloem waited two days to issue a second, clarifying statement.

Mr. Dijsselbloem conceded errors.

“Of course we should have spent more time, more wording, right from the start, on the distinction between a one-off wealth tax, a contribution, etc., which is a completely different thing” from the Union-wide deposit guarantee system, he said.

Mr. Dijsselbloem’s first challenge has been one of the hardest imaginable.

In seeking a solution for Cyprus, he has butted up against the reluctance of North European nations, including his own, to fork out money to a divided island in the Eastern Mediterranean and to save a banking system that has long benefited Russian investors whom many lawmakers, particularly in Germany, suspect of involvement in money laundering.

The Cypriots have stoked concerns by seeking to protect a banking sector that José Manuel Barroso, head of the European Commission, noted on Thursday was based on “an unsustainable financial system that is basically eight times bigger than” the island’s G.D.P.

Further complicating matters, Nicos Anastasiades, the newly elected Cypriot president, involved in some negotiations on Friday night, flatly refused a proposal to lower the tax on ordinary Cypriot deposit holders, fearing that a higher tax on bigger depositors would see them flee and hollow out the island’s vital financial services sector.

Derk Jan Eppink, a Dutchman elected to the European Parliament from Belgium, needled Mr. Dijsselbloem over allowing the Russians to help decide Cyprus’s fate.

There are tens of thousands of Russian citizens living on Cyprus, and Moscow has a strategic interest in the island because of its proximity to its ally, Syria, and because of newly discovered offshore gas reserves.

The danger now is that “Putin is going to keep you dangling,” Mr. Eppink said, referring to the Russian president, who denounced the weekend bailout proposal. Now, the lawmaker warned, “Russia will exert influence over Cyprus.”

Article source: http://www.nytimes.com/2013/03/22/business/global/eurogroup-chief-takes-some-blame-for-cyprus-crisis.html?partner=rss&emc=rss