Cyprus finance minister: Deposit haircut 'stupid idea'

Cyprus' new finance minister said on Friday that a suggestion for a forced loss on deposits in Cypriot banks as a way to lower a bailout amount is a stupid idea. A haircut on bank deposits or a bail-in has been suggested as a means of lowering the loan amount so as to render manageable the island's sovereign debt. However, the suggestion was originally dismissed even as an idea for discussion by new President Nicos Anastasiades in his inaugural address on Thursday and was rejected by his finance minister. "There is really no more stupid an idea even to consider a suggestion for a haircut on bank deposits," said Sarris in remarks to reporters soon after taking up his post. "It is something unheard of and I cannot understand where these ideas come from," he added. German newspaper Die Welt said Friday that a haircut on deposits of over 100,000 euros is one of three alternatives set out in a European Commission working document. The other two alternatives are either a write-down of the sovereign debt along with a program of privatizations and an increase of the corporate tax from 10 to 12.5 percent, or a direct recapitalization of the Cypriot banks by the European Stability Mechanism. Cyprus had requested bailout support but a provisional agreement is still under discussion, pending establishment of the amount needed to recapitalize the banks following huge losses on account of their exposure to the write-down of Greek debt. It is estimated that the eastern Mediterranean island will need about 17.5 billion euros to shore up its banks and fund the running of the government over the next three years. A Eurogroup ministerial meeting will discuss the Cyprus bailout on Monday in Brussels, but a top European Commission official said a bailout agreement is expected to be signed at the end of March