Earlier today, Eurogroup President Jeroen Dijsselbloem made some comments in an interview with Reuters and the FT to the effect that the Cyprus bailout deal could considered a template for bank restructurings elsewhere in the euro area.
Naturally, this sent bank stocks in the euro periphery tumbling.
Now, it appears that the Eurogroup is backing off from the stance taken earlier by Dijsselbloem in the interview.
It just put out a two-sentence statement clarifying its position:
Cyprus is a specific case with exceptional challenges which required the bail-in measures we have agreed upon yesterday.
Macro-economic adjustment programmes are tailor-made to the situation of the country concerned and no models or templates are used.
Below, via Reuters , are the comments Dijsselbloem made in the interview earlier.
"What we've done last night is what I call pushing back the risks," Dutch Finance Minister Jeroen Dijsselbloem, who heads the Eurogroup of euro zone finance ministers, told Reuters and the Financial Times hours after the Cyprus deal was struck.
"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," he said.
If that doesn't drive the point home that Cyprus could be viewed as a template for future restructurings going forward, additional comments from the FT's writeup of the joint interview should:
But he said that investor skittishness could ultimately make the financial sector healthier since it would raise the cost of financing for unsound banks.
“If I finance a bank and I know if the bank will get in trouble, I will be hit and I will lose money, I will put a price on that,” Mr Dijsselbloem said. “I think it is a sound economic principle. And having cheap money because the risk will be covered by the government, and I will always get my money back, is not leading to the right decisions in the financial sector.”
Apparently all it took was the market's reaction during the final few hours of trading in Europe for Dijsselbloem to rethink his comments.
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