Monday

20th Feb 2017

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.

EU ready to challenge US border tax

The EU is willing to fight any attempt by the Trump administration to impose border tax on imports, says trade commissioner Jyrki Katainen.

Opinion

Unfair EU-Canada trade deal is wrong response to Trump

The EU-Canada trade deal, which is to be voted on in the European Parliament next week, cements the inequalities, political exclusion and favours to corporations that feed far-right groups in Europe.

Visual Data

EU farming policy: The damage done by 20 years of inertia

The EU Commission will ask the public later this week how the common agricultural policy should be overhauled. Data from the past two decades reveals a catalogue of missed chances and failed reforms.

Stakeholders' Highlights

  1. Malta EU 2017End of Roaming Fees: Council Reaches Agreement on Wholesale Caps
  2. Nordic Council of MinistersNordic Innovation House Opens in New York to Help Startups Access US Market
  3. Centre Maurits CoppietersMinorities and Migrations
  4. Salzburg Global SeminarThe Child in the City: Health, Parks and Play
  5. UNICEFNumber of Ukrainian Children Needing Aid Nearly Doubles to 1 Million Over the Past Year
  6. Centre Maurits CoppietersThe Situation of Refugee Women in Europe
  7. Salzburg Global SeminarToward a Shared Culture of Health: Charting the Patient-Clinician Relationship
  8. European Free AllianceAustria Should Preserve & Promote Bilingual and Multinational Carinthia
  9. Martens CentreShow Your Love for Democracy! Take Part in Our Contest: "If It's Broken, Let's Fix It"
  10. CISPECloud Computing Leaders Establish Data Protection Standards to Protect Customer Data
  11. Malta EU 2017Landmark Deal Reached With European Parliament on Portability of Online Content
  12. Belgrade Security ForumBSF 2017: Building a Common Future in the Age of Uncertainty