Saturday

25th Mar 2017

Merkel warns Cyprus not to expect special treatment

  • Merkel is not rushing to support a Cypriot bailout (Photo: World Economic Forum)

German Chancellor Angela Merkel on Wednesday (9 January) warned Cyprus it should not expect special treatment when negotiating the terms of its bailout, which she suggested would not be concluded anytime soon.

Speaking alongside Malta's Prime Minister Lawrence Gonzi, Merkel praised his country for having a financially sound policy and gave it as an example of stability despite the eurozone crisis.

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.

Both Malta and Cyprus are island nations and joined the euro together in 2008. But Merkel said no comparison should be drawn between the two: "One island is not the same as the other. Malta and Cyprus are very different."

Cyprus last year requested an EU bailout. Its banking sector was drained of cash after having had to bear losses on the Greek loans they made. A lenient tax regime and connections with oligarchs in Russia and Ukraine had boosted Cyprus' economy in the period before the financial crisis.

But now Germany and other northern European countries are insisting that no money should flow to a country suspected of money laundering.

When asked if Cyprus should believe it can receive EU money without any privatisations or measures to fight money laundering, Merkel said:

"There can be no special conditions for Cyprus because we have common rules in Europe that are valid for everyone."

Cypriot President Dimitris Christofias has so far resisted the conditions of the bailout, especially privatisation measure which are a no-go for the only Communist leader in the EU.

Nicosia had hoped to ink a deal at an upcoming meeting of eurozone finance ministers on 21 January, but the deadline is likely to slip beyond the February presidential elections in Cyprus.

Merkel seems to back this strategy. At the press conference, she said that talks with the troika (EU commission, European Central Bank and International Monetary Fund) are "by far not over yet."

Even if she were to suddenly favour a quick deal on Cyprus - which she has not been so far - the Socialist opposition just signalled that it would veto the bailout request which has to be approved by the German parliament.

Merkel has had to rely on votes from the opposition for all the recent bailout-linked measures - for instance changes to the Greek programme - because recalcitrant backbenchers in her own coalition have deprived her of the symbolically important "chancellor majority."

Where should the money come from?

As for the Maltese Prime Minister, he had only one piece of advice for Cyprus: "Privatisation was good for us, it reduced our costs, it increased our competitiveness. If it makes sense for Cyprus, they should do it."

Germany insists on privatisation revenues to be used for part of the bailout. There has been speculation that income from the recently found gas reserves off the Cypriot coast could also be drawn upon to keep the overall debt at sustainable levels.

The IMF, on the other hand, wants to keep the bailout off the Cypriot state's books so that its debt does not increase at all, Handelsblatt reports.

An agreement last year on the eurozone bailout fund to pump money directly into banks was reached only under a German condition: that a eurozone-wide banking supervisor is set up first.

But work on the supervisor - within the European Central Bank - is still ongoing and would not be ready by end February or March when a Cypriot bailout could be agreed, a German source told this website.

SMEs lack support in EU financial plan

The European Commission's plan for a capital markets union is said to be aimed at small and medium-sized enterprises, but many could end up being left out in the cold.

Stolen Russian billions ended up in EU states

Illicit money flowing out of Russia ended up in almost every single EU state, an investigation has found, posing questions on the integrity of Europe’s banking systems.

Stakeholders' Highlights

  1. European Gaming & Betting Association60 Years Rome Treaty – 60 Years Building an Internal Market
  2. Malta EU 2017New EU Rules to Prevent Terrorism and Give More Rights to Victims Approved
  3. European Jewish Congress"Extremists Still Have Ability and Motivation to Murder in Europe" Says EJC President
  4. European Gaming & Betting AssociationAudiovisual Media Services Directive to Exclude Minors from Gambling Ads
  5. ILGA-EuropeTime for a Reality Check on International Day for the Elimination of Racial Discrimination
  6. UNICEFHuman Cost to Refugee and Migrant Children Mounts Up One Year After EU-Turkey Deal
  7. Malta EU 2017Council Adopts New Rules to Improve Safety of Medical Devices
  8. Nordic Council of MinistersNordic Energy Research: How to Reach 100 Percent Renewable Energy
  9. Party of European SocialistsWe Must Renew Europe for All Europeans
  10. MEP Tomáš ZdechovskýThe European Commission Has Failed in Its Fight Against Food Waste
  11. ILGA-EuropeEP Recognises Discrimination Faced by Trans & Intersex People
  12. Nordic Council of Ministers25 Nordic Bioeconomy Cases for Sustainable Change