Government accused of ‘huge mistake’ on Cyprus crisis
Sinn Féin President Gerry Adams TD has accused the government of making a huge mistake in initially supporting the demand by the EU that all bank depositors in Cyprus should be levied while allowing senior bondholders to be let off.
Speaking in the Dáil today the Taoiseach admitted that the issue of Cyprus had not been discussed in detail at the summit two weeks ago yet the government “welcomed and signed up to this development and European leaders then stood back over the last week and allowed Cyprus to be brought to the brink of economic collapse.”
Teachta Adams noted that, “the prevailing sense is of a European establishment making it up as it goes along.”
The Sinn Féin leader also warned that the decision to try and hit depositors under €100k “puts into sharp focus ECB President Mario Draghi’s statement last July that the bank will do whatever it takes to preserve the Euro. This appears to now include hitting depositors and possibly those with under €100,000 in a bank.”
Addressing the Taoiseach Teachta Adams said: “Your government welcomed this. That was a mistake. The Cypriot Parliament rejected it but the damage was done by then. Why should investors, especially large investors, trust the EU or ECB?
“Fears that bank accounts could be raided in future bailouts were given added weight by the head of the Eurozone Finance Ministers who at first suggested that the Cyprus bailout could be a template for future action and then he had to retract this.”
The Sinn Féin leader also criticised the government’s involvement in forcing Cyprus to raise its corporation tax.
“This is a sovereign state having a new tax rate imposed on it. The Irish government claims that Europe cannot make us increase our corporation tax rate – yet the government was part of the group forcing this on Cyprus.”
The full text of Sinn Féin President Gerry Adams remarks:
Taoiseach while the last European Council meeting focused on the “European Semester” and the economic priorities for the EU in 2013 the reality is that events in Cyprus have dominated attention over the last ten days or so.
It is clear, both from the economic priorities emanating from the Council and its approach to the Cyprus crisis, that the EU is wedded to the failed policies of austerity or fiscal consolidation as you call it.
There is nowhere the dynamism and determination needed to tackle the jobs crisis across the EU.
However, it is on the Cypriot situation I want to focus my remarks.
It is there that we see the real dysfunction at the heart of the EU approach to the economic crisis.
The fact that the Euro Group, including Minister Noonan, would sign up to a bail out which contained a levy on bank depositors under and over €100k, while sparing Senior Bondholders in the banks quite frankly beggars belief.
That was a huge mistake by your government.
You admit in your statement today that the issue was not discussed in detail at the summit, yet you welcomed and signed up to this development and European leaders then stood back over the last week and allowed Cyprus to be brought to the brink of economic collapse.
Instead of assisting the people of the island, they have bullied it and accused the Cypriot people of being the authors of their own demise.
So, much for European solidarity.
We don’t see such allegations being hurled at larger European states when they get themselves in difficulty.
The revised bailout agreement means that senior bondholders will take a hit as will deposit holders over €100,000.
While I welcome the decision not to hit deposit holders under €100,000 the reality is that the Rubicon has been crossed.
International depositors looking at the mess in Cyprus may consider not just withdrawing their money from banks there, but from across the EU.
It is claimed that there are several large multinationals who reportedly withdraw their money from Eurozone banks every Friday in case something happens over the weekend – and that was before this latest crisis.
So, the prevailing sense is of a European establishment making it up as it goes along.
The decision to try and hit depositors under €100,000 puts into sharp focus ECB President Mario Draghi’s statement last July that the bank will do whatever it takes to preserve the Euro.
This appears to now include hitting depositors and possibly those with under €100,000 in a bank.
Your government welcomed this. That was a mistake. The Cypriot Parliament rejected it but the damage was done by then.
Why should investors, especially large investors, trust the EU or ECB?
Fears that bank accounts could be raided in future bailouts were given added weight by the head of the Eurozone Finance Ministers who at first suggested that the Cyprus bailout could be a template for future action and then he had to retract this.
The ECB put Cyprus under huge pressure to agree a plan by threatening to collapse its banking system.
The Bailout package that has now been agreed includes the increase in their corporation tax from 10% to 12.5%.
This is a sovereign state having a new tax rate imposed on it.
The Irish government claims that Europe cannot make us increase our corporation tax rate – yet your government was part of the group forcing this on Cyprus.
Sinn Fein at the beginning of the Irish banking crisis called for bondholders to be burned.
And while we advocated the burning of bondholders in banks, Fianna Fáil, Fine Gael and Labour told us it would never happen, the EU would never let it happen, and that banks had to be bailed out at any cost.
The EU appears to have now signed off on the burning of senior bondholders in Cypriot banks.
Last June, your Government told us that a seismic game changer had been reached in Europe, which would see the separation of banking debt from sovereign debt.
You told us that in future bank crises, the ESM would directly recapitalize banks and the sovereign would not be expected to take on a bank bailout.
You told us that because we had taken on this liability, we would be retrospectively recapitalized.
The EU could have committed to using the ESM to cover losses needed for the Cypriot Banks.
They didn’t do this. Why Taoiseach? Why didn’t they do it?
And where now for the commitment to separate sovereign debt from Bank debt?
And comments over today and yesterday by some politicians now throw into doubt whether the ESM will ever be used to recapitalise banks whether retrospectively or not.
Yesterday the European Commission confirmed that it hopes the ESM fund will not be used for directly recapitalising banks.
This seems to confirm comments by the chief of the euro zone finance ministers Jeroen Dijsselbloem yesterday, who questioned whether the ESM bailout fund will ever be used to rescue banks directly.
So, Taoiseach where now our hopes that the ESM will be used to recapitalise the pillar Banks.
What about the €30 Billion of taxpayers money that that this Government and your predecessors gave to Bank of Ireland, AIB and Irish Life and Permanent?
There seems to be a complete U-turn in EU policy in this regard in relation to the use of the ESM and the burning of senior bondholders.
And this is a u-turn which causes real problems for citizens of this state which had this debt foisted on us by Fianna Fáil and we now have a legacy bank debt which may never be dealt with.
Taoiseach the critical questions for the Government in all this are:
1. What is the point of the ESM and where does Europe now stand on banking solidarity?
2. What is the Irish Governments attitude towards the burning of depositors in Irish/European banks and why did the Government support it in the Cypriot case?
3. Will the citizens of this ever receive debt assistance for the debt this Government and the previous Government put on the shoulders of the taxpayers to bail out banks with taxpayers’ money?
How will this be done- through the ESM or without the ESM?
And finally Taoiseach, prior to the European Council meeting you agreed to raise the Jerusalem report that had been published by European diplomats.
This report raised serious concerns about the actions of the Israeli government in building settlements and excluding Palestinians for their land.
You make no mention of this in your statement today.
Taoiseach did you raise this report as you promised to do so at the summit meeting?