Monday

2nd May 2016

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.

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.

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.

Investigation

VW will not publish emissions cheat report

Volkswagen said it would keep its preliminary report into the emissions scandal secret because publishing it would “present an unacceptable risk” to the firm.

News in Brief

  1. Netherlands funds €1.3mn Russian media project
  2. Fake euros network dismantled in Bulgaria
  3. Inflation negative in eurozone in April
  4. EU economy registers 0.5% growth in first quarter
  5. Eurovision says No to Kosovo, Palestine, IS flags
  6. EU to decide on future of tobacco agreement 'soon'
  7. Russia blames Sweden for frosty relations
  8. UN chief warns of 'growing xenophobia' in Europe

Stakeholders' Highlights

  1. European Roundtable of IndustrialistsDigitising European Industry
  2. Counter BalanceParliament Gets Tough on Control EU Bank's Funds
  3. ICRCSyria: Aleppo on the Brink of Humanitarian Disaster
  4. CESIWorld Day For Health and Safety at Work: Public Sector Workers in The Focus
  5. EFABasque Peace Process-Arnaldo Otegi Visits the European Parliament
  6. EscardioChina Pays Price of Western Lifestyle With Soaring Childhood Obesity
  7. Centre Maurits CoppetiersThe Existence of a State is a Question of Fact, Not a Question of Law
  8. Martens CentreJoin Us at The Event: Prospects For EU Enlargement After 2019
  9. ICRCSyria: Aid for Over 120,000 People Arrives in Besieged Town Near Homs
  10. Counter BalanceHighway to Hell: European Money Fuelling Controversial Infrastructure Projects
  11. EPSUResponds To Reported €300 Million McDonald’s Tax Bill in France
  12. Access NowAcademics and Privacy Groups Ask Obama to Reject Anti-encryption Law

Latest News

  1. EU roaming charge cut enters UK referendum campaign
  2. EU fiscal rules, migrants and Belgium's trick
  3. EU should call out Bangladesh on workers' rights
  4. Kosovo: Living in a ghetto on the EU fringe
  5. War crimes law poisons Serbia accession talks
  6. Italy and Austria try to calm tensions on Alpine pass
  7. French MPs call to lift Russia sanctions
  8. EU sides with embattled Greek PM in bailout talks