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EU/Cyprus/banks

Published on March 28, 2013
Reply by M. Pierre Moscovici, Minister of the Economy and Finance, to a question in the National Assembly (excerpts)

Paris, March 26, 2013

In the night of Sunday to Monday, a financial assistance agreement for €17 billion was signed with Greece, in constant liaison with the Cypriot authorities.

Before explaining what’s involved, I’d like to remind those who doubted it of one thing: we had to act. We were faced with a unique situation which couldn’t continue: what I’ve called a “casino economy”, with an offshore financial platform, banking balance sheets that bore no relation to GDP, a sizeable presence of non-residents among depositors, anomalies in rates of pay, and suspicions of laundering. For all these reasons we had to act, because the system was threatening to collapse.

We arrived – admittedly, after episodes we could have avoided – at an agreement that I regard as comprehensive and fair. It’s comprehensive because it involves the restructuring of the Cypriot banks, because it increases corporation tax in the country, because it enables us to verify the implementation of the EU anti-laundering conventions – which was necessary – and finally because it involves the resolution of one bank, supported by the island’s other large bank.

The agreement is fair because it spares savers with small and medium-sized deposits – that is, below €100,000. That’s always been France’s position, the one I’ve upheld from the outset, and the President’s, and it’s a cause we’re very keen to ensure compliance with, both in Cyprus and elsewhere: deposit guarantees.

Let me add that we must go further in reorienting the European enterprise. If we want to avoid facing such a situation again, we must build banking union and recapitalize the banks directly. As you can see, we have several battles ahead of us!./.

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