German Chancellor Angela Merkel, whose country is insisting that Cypriot bank depositors help pay the cost of a crisis they didn’t create, said that the Eurozone will not relent on that demand and warned Cypriots: “Don’t try our patience.” The hard stance came as she was talking to members of her Parliamentary party group while the Cypriot government was trying to find an alternate way to put up enough collateral to get 5.8 billion euros ($7.5 billion) from potential investors or another scheme to produce the equivalent.
International lenders have offered to provide a 10 billion euros ($13 billion) loan to keep the island country’s banks and economy from collapsing, but only if Cyprus comes up with the difference needed and reach a total of 17 billion euros ($21.9 billion) so that the government won’t have to default, a prospect that could rattle the Eurozone.
Germany is the largest contributor in the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) to bailout loans for Greece and would be for Cyprus as well, but Merkel has insisted on harsh austerity measures for both countries, making her an enemy to many but supported by others, particularly politicians who like her hard line.
She said she opposes one of the ideas being bandied about, to nationalize pension funds, suggesting that Cyprus will have no choice but to go back to the Parliament that rejected the confiscation tax 36-0 and try again, or find another method if it wants to keep getting liquidity from the European Central Bank (ECB) which has threatened to turn off the money tap as of March 25. Cypriot banks remain closed until then.
“I want Cyprus in the Eurozone but they have to understand that the existing business model has died,” she said, adding that Cypriots can not expect to keep a status quo with their country in crisis. The lenders want the government to seize up to 9.9 percent of bank account deposits, a plan that would break government guarantees to protect deposits under 100,000 euros ($130,000) from loss. The European Union said that guarantee does not prevent governments from seizing bank depositors money for its own use.