Deputy Prime Minister Ali Babacan criticized the Greek Cyprus bailout deal imposed by the European Union, the European Central Bank (ECB) and the International Monetary Fund (IMF), saying he does not find taxing deposits to be the right method in principle, during a meeting in Finland on Sunday.
Stating that the method used to save Greek Cyprus is a unique one based on its circumstances, he stressed that it should not, however, constitute an example for other EU countries. He also underlined that taxing the deposits of citizens under the bailout deal to avert a collapse of the banking system is not a method of resolution that can be approved by Turkey. “Unfortunately, the banking system of Greek Cyprus is not a decent one. These banks used to accept deposits they shouldn’t have been involved with and paid interest rates higher than the rates in international markets. They then tried to pay off their debts by becoming more indebted,” he said.
Babacan noted that this “Ponzi scheme” resulted in the Greek Cypriot government seeking help from the EU, saying: “Of course, the EU is not unaware of the situation, and maybe the bailout method was necessary for Greek Cyprus, but using the same method on any other country is objectionable.” Continuing with his comments, he said the use of the same method again would not be desirable from Turkey’s point of view and that confidence is a key component of the banking sector, and that what happened in Greek Cyprus should not be allowed to damage confidence in Europe’s banking sector.
Furthermore, he advised that the common economic ground in the eurozone should not be bruised and said that the common interests of countries should be considered while solving the problems. “In recent examples, we have seen that some countries did not follow the rules of the union but still ended up not paying a price for it, which puts the countries who do apply the rules in a disadvantageous position, resulting in unfairness,” he stated, adding that the concept of justice can only be protected by applying the rules equally. He urged eurozone countries to adopt a single fiscal policy and a strong banking policy framework, concluding that “a single monetary policy under macroeconomic management and 17 different fiscal policies cannot coexist. That just doesn’t work. And we have seen that it does not work.”