Saturday

27th Aug 2016

German opposition threatens EU aid for Cyprus

  • Classical-era ruins on Cypriot coastline: its banks may need up to €17 billion to survive (Photo: jnocca93)

German opposition leader Sigmar Gabriel has said he will try to block an EU-Cyprus bailout unless Cyprus cleans up its banking sector.

Speaking in German newspaper Sueddeutsche Zeitung on Wednesday (9 January), the centre-left SPD party chief said: "At present we do not [agree to the rescue package]. I cannot imagine that German taxpayers will save Cypriot banks whose business model is based on allowing tax fraud."

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

He added: "If [German Chancellor] Mrs Merkel wants SPD approval for the Cyprus package, she will have to have very good reasons. But I do not see these at present."

Eurozone finance ministers are currently waiting for a report by US-based consultancy firm Pimco on the long term health of Cypriot banks.

Cyprus expects them to agree a draft memorandum of understanding on the bailout - worth up to €17 billion - at a meeting in Brussels on 21 January and to formally approve the measures on 10 February.

But under German law, its finance chief, Wolfgang Schauble, must get parliamentary approval before signing a legally binding agreement in the EU's Luxembourg-based bailout fund, the ESM.

Gabriel's SPD party controls just 146 out of 622 seats in the Bundestag.

But according to Sueddeutsche Zeitung, Merkel's majority is under serious threat.

In addition to the SPD, Green deputies also have ethical reservations on Cyprus, while over 20 MPs in Merkel's ruling coalition oppose her euro policies on principle.

The debate comes after a leaked German intelligence report last year said Cyprus is a haven for Russian tax evaders and organised crime.

An EU diplomat told this website that December's draft of the bailout memorandum already stipulated "a number of conditions about transparency in the [Cypriot] financial sector."

He added: "I expect the final version of the memo to deal with these topics as well."

Meanwhile, Cyprus is mobilising its top officials to tell EU colleagues that its banks do not do anything wrong.

On Monday, the head of the Cypriot central bank, Panicos Demetriades, met with eurozone countries' ambassadors in Nicosia.

A follow-up meeting with Cypriot finance minister Vassos Shiarly is planned for this week or next week.

"[Demetriades] explained all the issues about money laundering - that the problem does not exist. He showed them reports by all the relevant bodies, such as the OECD [a Paris-based economic club], and he explained how the system works. A lot of people talk about this subject without really knowing the facts," a Cypriot spokesman, Nikos Christodoulides, told EUobserver.

He added that Russia might also be invited to contribute money if there is an EU bailout.

"First there must be an EU agreement, then we might ask them [Russia] to join," he said.

But for some, Russian input is not welcome.

Cyprus' anti-money-laundering body, Mokas, is currently investigating whether Cypriot banks were used to launder over €20 million of stolen money for Russian officials linked to the killing of anti-corruption activist Sergei Magnitsky in 2009.

Magnitsky's former employer, the UK-based investment firm Hermitage Capital, believes that Russian cash might be used to quash the probe.

"[Russian President] Putin is absolutely terrified of anyone lifting the lid on Cyprus and is willing to spend any amount of government money to make sure that doesn't happen," Hermitage Capital chief Bill Browder said.

News in Brief

  1. Hungary plans to reinforce border fence against migrants
  2. France's highest court suspends burkini ban
  3. Greeks paid €1bn more in taxes in June
  4. Greek minister denounces EU letter on former statistics chief
  5. Turks seeking asylum in Greece may cause diplomatic row
  6. Merkel becomes digital resident of Estonia
  7. Report: VW will compensate US dealers with €1bln
  8. EU mulls making Google pay news media for content

Stakeholders' Highlights

  1. GoogleBrussels - home of beer, fries, chocolate and Google’s Public Policy Team - follow @GoogleBrussels
  2. HuaweiSeeds for the Future Programme to Bring Students from 50 countries to China for Much-Needed ICT Training
  3. EFASpain is not a democratic state. EFA expresses its solidarity to Arnaldo Otegi and EH Bildu
  4. UNICEFBoko Haram Violence in Lake Chad Region Leaves Children Displaced and Trapped
  5. HuaweiMaking Cities Smarter and Safer
  6. GoogleHow Google Makes Connections More Secure For Users
  7. EGBAThe EU Court of Justice Confirms the Application of Proportionality in Assessing Gambling Laws
  8. World VisionThe EU and Member States Must Not Use Overseas Aid for Promoting EU Interests
  9. Dialogue PlatformInterview: "There is a witch hunt against the Gulen Movement in Turkey"
  10. ACCAACCA Calls for ‘Future Looking’ Integrated Reporting Culture With IIRC and IAAER
  11. EURidNominate Your Favourite .eu or .ею Website for the .EU Web Awards 2016 Today!
  12. Dialogue PlatformAn Interview on Gulen Movement & Recent Coup Attempt in Turkey