Wednesday

22nd Nov 2017

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."

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

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.

Investigation

Cyprus launches probe into Russian mafia money

Cyprus has opened an investigation into evidence that stolen Russian tax money linked to the murder of Sergei Magnitsky was laundered through its banks.

Merkel warns Cyprus not to expect special treatment

German Chancellor Angela Merkel has warned Cyprus it should not expect special treatment when negotiating the terms of its bailout, which she suggested would not be concluded anytime soon.

News in Brief

  1. December euro summit still on, Tusk confirms
  2. EU calls for end to Kenya election crisis
  3. Report: Israeli PM invited to meet EU ministers
  4. French banks close Le Pen accounts
  5. Commission relaxes rules on labelling free range eggs
  6. Commission issues €34m fine over car equipment cartel
  7. Estonian presidency 'delighted' with emissions trading vote
  8. Mladic found guilty of genocide and war crimes

Stakeholders' Highlights

  1. Idealist Quarterly"Dear Politics, Time to Meet Creativity!" Afterwork Discussion & Networking
  2. Mission of China to the EUAmbassador Zhang Ming Received by Tusk; Bright Future for EU-China Relations
  3. EU2017EEEstonia, With the ECHAlliance, Introduces the Digital Health Society Declaration
  4. ILGA EuropeFreedom of Movement For All Families? Same Sex Couple Ask EU Court for Recognition
  5. European Jewish CongressEJC to French President Macron: We Oppose All Contact With Far-Right & Far-Left
  6. EPSUWith EU Pillar of Social Rights in Place, Time Is Ticking for Commission to Deliver
  7. ILGA EuropeBan on LGBTI Events in Ankara Must Be Overturned
  8. Bio-Based IndustriesBio-Based Industries: European Growth is in Our Nature!
  9. Dialogue PlatformErdogan's Most Vulnerable Victims: Women and Children
  10. UNICEFEuropean Parliament Marks World Children's Day by Launching Dialogue With Children
  11. European Jewish CongressAntisemitism in Europe Today: Is It Still a Threat to Free and Open Society?
  12. Counter BalanceNew Report: Juncker Plan Backs Billions in Fossil Fuels and Carbon-Heavy Infrastructure

Latest News

  1. Mali blames West for chaos in Libya
  2. Orban stokes up his voters with anti-Soros 'consultation'
  3. Commission warns Italy over high debt level
  4. Mladic found guilty for Bosnia genocide and war crimes
  5. Uber may face fines in EU for keeping data breach secret
  6. EU counter-propaganda 'harms' relations, Russia says
  7. The EU's half-hearted Ostpolitik
  8. Glyphosate: 1.3 million EU citizens call for ban