GROWING ANGER:  Students protest outside the presidential palace in Nicosia on Tuesday. Picture: REUTERS
GROWING ANGER: Students protest outside the presidential palace in Nicosia on Tuesday. Picture: REUTERS

LONDON — UK Chancellor of the Exchequer George Osborne on Tuesday criticised eurozone countries over their handling of Cyprus’s €10bn rescue and said he had fought the worst of the plan.

"It has not been well handled over the last 10 days," Mr Osborne told the House of Commons Treasury committee in London.

The chancellor criticised an initial plan to tax all bank deposits to help pay for the rescue, and said he had made "strong representations" to change it.

Cyprus was spared a disorderly sovereign default and unprecedented exit from the eurozone on Monday by bowing to demands from creditors to shrink its banking system in exchange for aid.

It was the second time in nine days that the Mediterranean island struck a deal with its euro partners and the International Monetary Fund (IMF). Parliament in Nicosia rejected a key plank of the first accord, a tax on all bank accounts that sparked the indignation of smaller depositors.

The banking crisis in Cyprus was "a long time in the making", Mr Osborne said. Eurozone governments, while making attempts to protect their taxpayers and learn the lessons of previous bail-outs, acted too slowly, and the previous Cypriot president had also hindered a solution.

"It’s clearly the case that we all would have been better served if the eurozone had moved more swiftly to resolve its problems."

The UK made representations to Cyprus, Russia and the IMF to stop account holders with less than €100,000 from being made to contribute to the bail-in, Mr Osborne said, adding he was "pleased" to see it was not in the final deal. The UK Treasury has sent Tom Scholar to advise the Cypriot government.

Bloomberg