European Economic Affairs Commissioner Olli Rehn has warned that debt-riven Cyprus could exit the eurozone without a bailout in an interview with a German news weekly published Sunday.
“Even if you come from a big EU country, you should be aware that every euro member is systemically relevant,” Rehn told Spiegel magazine when asked why Cyprus needed a rescue programme.
“If Cyprus became bankrupt in a disorderly way, the result would be almost certainly an exit from the eurozone,” he said in the edition due to hit newsstands Monday.
He added that a pledge by the members of the single currency to preserve the euro’s unity had calmed the financial markets. “We should not endanger this success,” he warned.
New Cypriot President Nicos Anastasiades has vowed to save the nearly bankrupt Mediterranean island from financial meltdown saying he will seek to secure an “earliest possible” bailout.
Euro finance ministers are due to resume discussions on a Cyprus bailout package on Monday.
Cyprus wants a 17-billion-euro ($22.3 billion) loan from its eurozone partners and the International Monetary Fund, equal to the size of its economy.
But the EU and IMF want guarantees on the viability of Cypriot debt after learning the hard way from their bailout of Greece that began in 2010 and was restructured in 2012.
German Finance Minister Wolfgang Schaeuble told Sunday’s Tagesspiegel newspaper that the Cypriot problem was “not easy to solve” but insisted an “appropriate” solution would be found.
Asked if Cyprus was systemically relevant for Europe, he said the EU’s firewall for helping struggling eurozone members, the European Stability Mechanism, required a “clear and resilient” justification as a condition for helping a country.
“We are waiting for that. There are arguments in favour of classifying Cyprus as systemically relevant,” he added.
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