MEP Sharon Bowles on Cyprus deal: the recognition that banks can fail and that the deposit guarantee principle must be upheld

MEP Sharon Bowles, Chair of the European Parliament’s economic and monetary affairs committee welcomes the agreement on Cyprus, particularly the recognition that banks can fail and that the deposit guarantee principle must be upheld.

Sharon Bowles said:

I welcome the new agreement reached earlier today on the Cyprus bail-out, since it is based on a proper hierarchy of losses and on the acceptance that a bank can fail. This is in line with the direction of EU policy and legislation.  The deal will however have adverse effects on business and the economy, which, on top of the loss of banking income will need urgent support.

I am also glad that EU principles have been upheld: the euro area has reaffirmed that all insured depositors in all banks will be fully protected.

The Bank of Cyprus now needs to find stability soon. I note that the reference to determining losses by the end of the program is too vague and there is a pressing need to recapitalise Bank of Cyprus to reduce uncertainty and allow capital controls to be lifted.

Citizens and markets are puzzled with the degree of improvisation that euro zone leaders have shown. Shaky agreements that last less than 48 hours are very costly for everybody and lead to an explosive political situation. No system and no structure can afford to be in a permanent state of emergency.

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