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Luxembourg Finance Minister Comments Undermine Euro

Posted by Joseph Trevisani on Mar 19, 2013 12:33:00 PM

     FRANKFURT (MNI) - The Eurzone can expect to suffer from more instability in the next few days over the Cyprus bailout plan and a flight of capital from the region cannot be ruled out, Luxembourg Finance Minister Luc Frieden said in an interview published Tuesday.

     "I don't think Europe is now unstable, but we will now have a few days of more instability," Frieden told the German television station DAF.

     Frieden acknowledged that some Eurozone finance ministers may have "underestimated" the risks associated with the bailout plan, which foresees Cyprus contributing to an aid package for its banking sector through a one-time tax on domestic bank deposits.

     Frieden said a capital flight from the Eurozone "can never be ruled out. Investors are free. But I think it would be the wrong reaction. Europe is in a difficult phase but it also has a future."

     The Cypriot parliament is set to reject the bailout program. The move to tax bank  deposits, designed to to bring in revenue of E5.8 billion, has provoked a furious reaction in the country.

     The move has also sparked concerns that citizens in other Eurozone countries may consider withdrawing deposits from banks. But Frieden stressed that "the deposits of all other (EMU) countries are safe."

 

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