Saturday

15th May 2021

Germany and ECB clash over Cyprus

  • Germany's finance minister Schaeuble says Cyprus is not big enough to pose any dangers to the eurozone (Photo: World Economic Forum)

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

Last week Schaeuble claimed that Cyprus was not "systemically relevant" to the survival of the eurozone. But ECB Mario Draghi has directly contradicted the statement Der Spiegel reported in a preview of its Monday (28 January) edition.

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

Draghi retorted that he "hears that a lot from jurists," as Schauble has studied law. But the question whether Cyprus is systemically relevant was a matter for economists to decide, the Italian banker said, warning that a Cypriot bankruptcy would destroy the recent market calm about the eurozone.

Economics affairs commissioner Olli Rehn and the head of the eurozone bailout fund (ESM), Klaus Regling, sided with Draghi, Spiegel reports.

ECB board member Joerg Asmussen took a similar stance: "Disorderly developments in Cyprus could undermine progress made in 2012 in stabilising the euro area. Cyprus could well be systemic for the rest of the euro area despite its size."

"Under normal circumstances one would expect the direct impact of a default to be limited, and it's obvious that without assistance the country will default," Asmussen told Reuters on Tuesday.

A spokesman for the German finance ministry on Monday told this website that he cannot comment on "internal Eurogroup discussions."

The spokesman noted however that "the question of whether the situation in Cyprus endangers the stability of the eurozone as a whole" is part of the legal base for a bailout from the eurozone funds.

Discussions will continue pending a report by the troika of EU commission officials, ECB and International Monetary Fund. A meeting of eurozone finance ministers in March will come back to the Cypriot bailout request, the spokesman added.

Meanwhile, Cypriot officials claim Germany is stalling the island's bailout and accusing it of being a money laundering hub out of political considerations ahead of general elections in September.

"The issue is a political one because of the German elections," a Cypriot government source told AFP.

"Another reason is that countries would like to have a piece of our pie as a financial centre," the source added.

A leaked report by the German foreign intelligence service pointed to Russian and Ukrainian oligarchs laundering money in Cyprus. Its politicians have since tried to convince EU officials this is not the case.

"It is obvious that behind the attacks against Cyprus there are vested interests. Those who attack Cyprus want to take its role as a serious, international, financial and investment centre," government spokesman Stefanos Stefanou told reporters on Thursday.

News in Brief

  1. No EUobserver newsletter on Friday 14 May
  2. Germany stops Facebook gathering WhatsApp data
  3. Italy rebuts reports of EU deal with Libya
  4. MEPs demand EU states protect women's reproductive rights
  5. At least nine dead in Russia school shooting
  6. Bulgaria interim government appointed until July election
  7. German priests defy pope to bless same-sex couples
  8. New EU public prosecutor faults Slovenia

Vietnam jails journalist critical of EU trade deal

A journalist who had demanded the EU postpone its trade deal with Vietnam until human rights improved has been sentenced to 15 years in jail. The EU Commission says it first needs to conduct a detailed analysis before responding.

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic Council enters into formal relations with European Parliament
  2. Nordic Council of MinistersWomen more active in violent extremist circles than first assumed
  3. Nordic Council of MinistersDigitalisation can help us pick up the green pace
  4. Nordic Council of MinistersCOVID19 is a wake-up call in the fight against antibiotic resistance
  5. Nordic Council of MinistersThe Nordic Region can and should play a leading role in Europe’s digital development
  6. Nordic Council of MinistersNordic Council to host EU webinars on energy, digitalisation and antibiotic resistance

Latest News

  1. EU aims at 'zero pollution' in air, water and soil by 2050
  2. French police arrest Luxembourg former top spy
  3. Vaccine drives spur better-than-expected EU economic recovery
  4. Slovenia causing headaches for new EU anti-graft office
  5. 'No place to hide' in Gaza, as fighting escalates
  6. EU chases 90m AstraZeneca vaccines in fresh legal battle
  7. Fidesz MEP oversees FOI appeals on disgraced Fidesz MEP
  8. Belgium outlines summer Covid relaxation plans

Join EUobserver

Support quality EU news

Join us