Wednesday

6th Jul 2022

German opposition threatens EU aid for Cyprus

  • Classical-era ruins on Cypriot coastline: its banks may need up to €17 billion to survive (Photo: jnocca93)

German opposition leader Sigmar Gabriel has said he will try to block an EU-Cyprus bailout unless Cyprus cleans up its banking sector.

Speaking in German newspaper Sueddeutsche Zeitung on Wednesday (9 January), the centre-left SPD party chief said: "At present we do not [agree to the rescue package]. I cannot imagine that German taxpayers will save Cypriot banks whose business model is based on allowing tax fraud."

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

He added: "If [German Chancellor] Mrs Merkel wants SPD approval for the Cyprus package, she will have to have very good reasons. But I do not see these at present."

Eurozone finance ministers are currently waiting for a report by US-based consultancy firm Pimco on the long term health of Cypriot banks.

Cyprus expects them to agree a draft memorandum of understanding on the bailout - worth up to €17 billion - at a meeting in Brussels on 21 January and to formally approve the measures on 10 February.

But under German law, its finance chief, Wolfgang Schauble, must get parliamentary approval before signing a legally binding agreement in the EU's Luxembourg-based bailout fund, the ESM.

Gabriel's SPD party controls just 146 out of 622 seats in the Bundestag.

But according to Sueddeutsche Zeitung, Merkel's majority is under serious threat.

In addition to the SPD, Green deputies also have ethical reservations on Cyprus, while over 20 MPs in Merkel's ruling coalition oppose her euro policies on principle.

The debate comes after a leaked German intelligence report last year said Cyprus is a haven for Russian tax evaders and organised crime.

An EU diplomat told this website that December's draft of the bailout memorandum already stipulated "a number of conditions about transparency in the [Cypriot] financial sector."

He added: "I expect the final version of the memo to deal with these topics as well."

Meanwhile, Cyprus is mobilising its top officials to tell EU colleagues that its banks do not do anything wrong.

On Monday, the head of the Cypriot central bank, Panicos Demetriades, met with eurozone countries' ambassadors in Nicosia.

A follow-up meeting with Cypriot finance minister Vassos Shiarly is planned for this week or next week.

"[Demetriades] explained all the issues about money laundering - that the problem does not exist. He showed them reports by all the relevant bodies, such as the OECD [a Paris-based economic club], and he explained how the system works. A lot of people talk about this subject without really knowing the facts," a Cypriot spokesman, Nikos Christodoulides, told EUobserver.

He added that Russia might also be invited to contribute money if there is an EU bailout.

"First there must be an EU agreement, then we might ask them [Russia] to join," he said.

But for some, Russian input is not welcome.

Cyprus' anti-money-laundering body, Mokas, is currently investigating whether Cypriot banks were used to launder over €20 million of stolen money for Russian officials linked to the killing of anti-corruption activist Sergei Magnitsky in 2009.

Magnitsky's former employer, the UK-based investment firm Hermitage Capital, believes that Russian cash might be used to quash the probe.

"[Russian President] Putin is absolutely terrified of anyone lifting the lid on Cyprus and is willing to spend any amount of government money to make sure that doesn't happen," Hermitage Capital chief Bill Browder said.

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.

Opinion

Keeping gas as 'green' in taxonomy vote only helps Russia

Two days before Vladimir Putin launched his illegal war on my home country Ukraine, Russian energy minister Nikolai Shulginov gave an interview addressing the European Commission's taxonomy on sustainable activities — saying he was pleased it kept gas as 'green'.

News in Brief

  1. Alleged Copenhagen shooter tried calling helpline
  2. Socialist leader urges Czech PM to ratify Istanbul convention
  3. Scottish law chief casts doubt on referendum
  4. British PM faces mounting rebellion
  5. Russian military base near Finnish border emptied
  6. Euro slides to lowest level in two decades
  7. State intervention ends Norwegian oil and gas strike
  8. France repatriates 35 children from Syrian camp

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic and Canadian ministers join forces to combat harmful content online
  2. Nordic Council of MinistersNordic ministers write to EU about new food labelling
  3. Nordic Council of MinistersEmerging journalists from the Nordics and Canada report the facts of the climate crisis
  4. Council of the EUEU: new rules on corporate sustainability reporting
  5. Nordic Council of MinistersNordic ministers for culture: Protect Ukraine’s cultural heritage!
  6. Reuters InstituteDigital News Report 2022

Latest News

  1. EU readies for 'complete Russian gas cut-off', von der Leyen says
  2. Rising prices expose lack of coherent EU response
  3. Keeping gas as 'green' in taxonomy vote only helps Russia
  4. 'War on Women' needs forceful response, not glib statements
  5. Greece defends disputed media and migration track record
  6. MEPs adopt new digital 'rule book', amid surveillance doubts
  7. 'World is watching', as MEPs vote on green finance rules
  8. Turkey sends mixed signals on Sweden's entry into Nato

Join EUobserver

Support quality EU news

Join us