Eurogroup chief faces heavy flak over Cyprus deal

Two months into the job as head of Eurozone finance ministers, Jeroen Dijsselbloem's handling of the Cyprus bailout and his suggestion it might apply elsewhere have sparked sharp questions over the Dutchman's readiness for the post. The 43-year-old Dijsselbloem was on the rack Tuesday after controversial decisions to wind up Laiki (Popular Bank) and to hit large depositors at Bank of Cyprus with hefty losses in a re-negotiated rescue deal reached early Monday. In interviews afterwards, Dijsselbloem suggested that the Cyprus approach, with its "bail-in" provision for depositors above 100,000 euros (Us$129,000), could be used again to avoid having taxpayers carry the burden, as they have done up now in the three-year old crisis. "Taking away the risk from the financial sector and taking it on to the public shoulders is not the right approach," Dijsselbloem said. "If we want to have a healthy, sound financial sector, the only way is to say: 'Look, there where you take the risks, you must deal with them, and if you can't deal with them you shouldn't have taken them on and the consequence might be that it is end of story." That final comment sent global markets into a tailspin. Currency analysts Moneycorp labelled Dijsselbloem "a loose cannon" responsible for 13 billion euros being wiped off the value of Eurozone financial companies in a day. While his office testily rejected suggestions that he was suggesting any "template" for possible new bailouts, the damage was done. Veteran predecessor and Luxembourg Premier Jean-Claude Juncker had already criticised what he said was a botched initial attempt to impose a levy on all Cyprus bank deposits, including those below 100,000 euros, which are supposed to be protected under EU law. And on Monday, a senior EU adviser, echoing the thoughts of many, said Dijsselbloem's interview slip was a "communication error ... but what an error it was." Financial analysts were equally unforgiving. ING credit strategist Jeroen van den Broek said the Eurogroup chairman must show that he understands "the full weight, meaning and context of the words 'bail-in, resolution framework, subordinated, senior, covered bond, hybrid capital, secured, unsecured ... and even deposit'." Erik Nielsen, chief economist with UniCredit Research, highlighted what he saw as "hypocrisy" just weeks after the Dutch government nationalised SNS Reaal, "saving its depositors and others at the expense of Dutch pensioners and other taxpayers." Dijsselbloem stood his ground Tuesday, telling Dutch newspaper Volkskrant the fresh euro-crisis uncertainty was whipped up by "journalists, politicians and opinion makers." He told the daily that Juncker apologised after calling the idea of taxing all savings a "deficient" decision, basically "because I wasn't there." It was "intended as a joke," said Dijsselbloem. "I don't feel damaged - on the contrary, it has strengthened me," he added. The finance minister, meanwhile, was not entirely without support. Sharon Bowles, who chairs the European Parliament's economics committee, had been critical of him over a first Cyprus bailout, agreed March 16. But Bowles told AFP on Tuesday it was mischievous to attribute the market wipe-out entirely to his remarks. Dijsselbloem had "behaved honourably and competently" by "not sneaking round the (deposit) guarantee" during their meetings, she said. "He took it on the chin, as he did so in a fairly robust private session we had," she said. "The fact is, bank resolution has now entered the sovereign bailout toolbox - that tool is being used, sharpened, and we will see it again," Bowles said. "Yes, (Dijsselbloem) needs more ringcraft - but I give him points for being honest ... I think, in the end, he'll get ther