Thursday

21st Jan 2021

Germany wants Russian contribution to Cyprus bailout

  • Moscow: Russia has strong financial interests in Cyprus - it should also share the bailout burden, says Germany (Photo: Wikipedia)

The German government wants Russia to chip in to the bailout currently being discussed for Cyprus - a eurozone country whose banking system has generously accommodated Russian businessmen.

"The position of the German government is that it would be welcome if Russia extended its aid to Cyprus, as it has done in the past," a German official told this website on Tuesday (15 January).

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

Earlier that day, news agency Bloomberg said German finance minister Wolfgang Schaeuble told MPs in a closed meeting that Moscow must contribute to the eurozone bailout for Cyprus.

Helping out Cyprus - whose banks, according to a leaked German intelligence report, are guilty of money laundering for Russian oligarchs and organised crime - is controversial for German politicians. Chancellor Angela Merkel warned last week that the island nation must not expect "special treatment" and that she will push for strict conditions for any international loan.

Russia already helped Cyprus to avoid bankruptcy in 2011 with a €2.5 billion loan for its banks, which had to stomach huge losses on loans to Greece.

Another Russian contribution or an extension of the repayment deadline for the 2011 loan would lower the sum which Cyprus needs to borrow from eurozone countries.

No official figures have been put forward yet, with the results of an audit of Cypriot banks' needs by US consultancy Pimco expected at the end of this week. But the figure discussed by EU diplomats is €17 billion, almost as much as the total yearly economic output of the small country (€18bn).

A €17 billion bailout would mean that Cyprus' debt - currently over 70 percent of GDP - would reach 170 percent, way more than the troika of international lenders has ever accepted as "sustainable" for other bailout states.

Greece last year reached a debt of 170 percent of GDP, becoming the subject of months of wrangling in the troika on how to reduce the burden over the next few years. The International Monetary Fund insisted that eurozone governments must take losses on Greek loans.

A similar haircut scenario for Cyprus is highly unlikely.

Instead, the troika has so far pressed for Cyprus to privatise as many firms as it can and to use the new revenue to reduce the rescue package to be drawn from the eurozone's bailout fund (the ESM).

But the current Cypriot president, Demetris Christofias, the EU's only Communist leader, has fiercely opposed privatisation.

His position is one reason why a decision on the bailout is unlikely to be taken before presidential elections take place in Cyprus on 17 February - Christofias is not standing for re-election, while the frontrunner, Nicos Anastasiades, has already pledged to do what it takes to get international help.

Anastasiades, who is affiliated with the centre-right European People's Party (EPP), was last week endorsed by Merkel at an EPP meeting on the island.

She warned Cyprus not to expect a quick deal, as talks on the bailout are "by far" not concluded, however.

For his part, Anastasiades said there are "visible dangers to [a bailout] delay," with the Moody's ratings agency downgrading Cyprus further into junk territory due to the threat of a default one day before he spoke.

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.

Germany and ECB clash over Cyprus

The European Central Bank is at odds with Germany's finance minister over the consequences of not bailing out Cyprus and its wider implications for the eurozone.

Russian PM lectures Barroso on Cyprus

Russian PM Medvedev on Thursday lectured EU commission chief Barroso on the Cyprus bailout, while leaked EU papers show panic behind the scenes.

News in Brief

  1. Brexit prompted finance exodus from UK to France
  2. Italian PM Conte wins confidence vote in Senate
  3. Borrell washes hands of EU's Venezuela policy
  4. Russia backs Greece in eastern Mediterranean dispute
  5. 'Ski-holiday' Switzerland reaches new infection high
  6. Germany extends lockdown, others expected to follow
  7. Barnier to be Brexit special adviser to von der Leyen
  8. EU commisioner to visit Bosnia's Lipa migrant camp

Budget deal struck, with Hungary threat still hanging

Ultimately, the European Parliament managed to squeeze an extra €16bn in total - which will be financed with competition fines the EU Commission hands out over the next seven years, plus reallocations within the budget.

Stakeholders' Highlights

  1. UNESDAEU Code of Conduct can showcase PPPs delivering healthier more sustainable society
  2. CESIKlaus Heeger and Romain Wolff re-elected Secretary General and President of independent trade unions in Europe (CESI)
  3. Nordic Council of MinistersWomen benefit in the digitalised labour market
  4. Nordic Council of MinistersReport: The prevalence of men who use internet forums characterised by misogyny
  5. Nordic Council of MinistersJoin the Nordic climate debate on 17 November!
  6. UNESDAMaking healthier diets the easy choice

Latest News

  1. MEPs call to halt Russia pipeline over Navalny arrest
  2. EU targets vaccinating 70% of adults by summer
  3. Portugal pushes to start delayed 'future EU' conference
  4. EU Parliament pressing for inquiry into Frontex
  5. Untapped potential of the single market could boost European recovery
  6. Biden's 'Age of Aquarius'? Mars and Venus will clash over China
  7. The new dimension of 'ever-closer union'
  8. What do new CDU chief's pro-Russia views mean for Europe?

Join EUobserver

Support quality EU news

Join us