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Eurogroup head’s statement on Cyprus dampened investors’ confidence on Monday

FXstreet.com (Barcelona) - Following Eurogroup chief Jeroen Dijsselbloem’s comments on Monday, suggesting that the bailout deal struck between Cyprus and the Troika might be a model for rescue programs for other EU countries in the future, caused the European stock markets to drop sharply in late trading.

The head of Eurozone finance ministers tried to tone down his statement later on by saying that “Cyprus is a specific case with exceptional challenges which required the bail-in measures we have agreed upon yesterday.” He also added that the rescue program was designed to fit the needs of the specific country, which has an oversized banking sector, and that no model was used when establishing it.

“His timing was awful but there's no point saying banks must not be too big to fail, and then bailing out all bond holders and depositors when they do fail,” Kit Juckes from Societe Generale comments. “Mr Dijsselbloem has however increased risk aversion. Bank regulators will be more conservative, savers more nervous, the monetary transmission mechanism more broken.”

In the European evening Cypriot President Nicos Anastasiades assured that the rescue plan agreed with the Troika was in the best interest of all the citizens. Meanwhile, it was confirmed that Cypriot banks would remain closed also on Thursday and after their reopening capital controls would be imposed.

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