Cyprus bailout prevented 'disorderly default', MEPs are told
MEPs have been told that without the €10bn EU-IMF bailout, Cyprus would have suffered a "disorderly default" on its debts.
Giving evidence to the Economic and Monetary Affairs Committee on 8 May 2013, Olli Rehn laid much of the blame for the island's economic crisis with the country's previous Communist government, that was voted out of office earlier this year.
The Economic Affairs Commissioner said it was "unfortunate that it took Cyprus more than half a year to accept the gravity of the situation and the un-sustainability of its business model".
Jörg Asmussen, from the European Central Bank, agreed that Cyprus should have acted sooner in requesting international assistance, saying that supervision of the country's financial sector was "too weak", leading to the two largest Cypriot banks needing bailout of €8bn, representing almost half of the country's entire GDP.
The original bailout proposal included a one-off tax on the deposits of all customers of Cypriot banks, starting at 6.75% for the smallest deposits.
This proposal led to widespread protests and was rejected by the Cypriot parliament.
Under revised terms and conditions, only deposits over €100,000 will be used to fund the bailout package.
The Commission and the European Central Bank - along with the International Monetary Fund - make up the so-called "troika" that oversees the bailouts of struggling EU countries.
Mr Rehn added that he hoped the economic crisis could reignite talks on the re-unification of Cyprus, which has been split since the 1970s between the Greek south and the Turkish north.
The self-declared Turkish Republic of Northern Cyprus is only recognised by Turkey, but Mr Rehn - a former Enlargement Commissioner - said that reunification would "give a major boost to economic development in Cyprus".
Democracy Live provides highlights of the debate, full coverage can be viewed here. bbc
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