“Unique” Cypriot bailout couldn’t happen in Spain, says government

The painful terms of the Cypriot bailout approved by the European Union on Saturday would never be put in place in Spain because Cyprus is “a unique case,” say Spanish officials, who have also praised the rescue plan for the Mediterranean island.

“It is a good plan because it resolves the problem in Cyprus, but it cannot be applied to another country because we are talking about a unique case,” an Economy Ministry source said on Sunday. Spain’s major opposition party, however, doesn’t agree.

Under the terms of the deal, holders of bank accounts with more than 100,000 euros will be taxed 9.9 percent while those with less funds in savings accounts will have to pay 6.7 percent. EU officials hope that Cyprus will be able to raise some 10 billion euros under the bailout, which Brussels agreed to give to the Nicosia government.

Cyprus was forced to request the rescue package because its outsized banking sector — worth eight times the country’s GDP — was heavily exposed to Greek debt.

Spanish government sources said that despite news reports that Cypriots’ bank accounts will be frozen, citizens will be able to withdraw their money from Tuesday onward, after a national holiday.

Nevertheless, the decision, announced on Saturday morning, stunned Cypriots and caused a run on ATMs, most of which were emptied within hours. The government also suspended electronic transfers.

A Bank of Spain spokesman told Reuters on Sunday that there had been no sign of deposit flight in Spain.

Cyprus is the latest country to ask Brussels for a rescue plan following Greece, Portugal, Ireland and Latvia. Last year saw Spain apply for European aid to rescue its ailing banks.

Street protests

Cyprus’s newly elected President Nicos Anastasiades postponed a meeting with lawmakers on Sunday to discuss the terms as thousands of Cypriots took to the streets to protest the EU bailout deal. The island’s parliament is set to vote on the aid package on Monday during an emergency session.

Valeriano Gómez, the Socialist spokesman for economy and employment in the Spanish parliament, criticized the deal because he believes it could set a precedent for other nations who ask for a bailout.

“This is not the road we want Europe to take,” he said during a press conference at the Socialist party headquarters in Madrid. “This is another sign that signals a weakness in European monetary policy.”

Popular Party secretary general María Dolores de Cospedal on Sunday also dismissed notions that such formulas could be applied to Spain. During a press conference in Toledo, she said that “a year ago everyone thought that Spain was the next in line for a rescue.”

“Just last year we were talking about how difficult it was and now everything has dropped substantially — our risk premium — and we haven’t had to look abroad for financing.”