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29th May 2022

Bundestag approves Cyprus bailout

  • The German Bundestag has approved all eurozone bailouts so far (Photo: BriYYZ)

The German Parliament on Thursday (18 April) approved with a large majority a €10 billion EU and International Monetary Fund bailout for Cyprus. They also backed a request to give seven extra years for Ireland and Portugal to repay their loans.

Out of the 600 MPs who cast their vote on the Cyprus bailout, 487 were in favour, 102 against and 13 abstained.

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The Bundestag previously had threatened to veto a Cyprus deal due to concerns over money laundering and doubts that the tiny Mediterranean island is "relevant" enough for the eurozone to be worth saving.

Speaking ahead of the vote, German finance minister Wolfgang Schaeuble said even though the Cypriot economy is less than 0.1 percent of the eurozone GDP, letting the country go bust would undo the market confidence that has returned over the past year and endanger Greece, Portugal, Ireland and Spain.

"Cyprus is systemically relevant," Schaeuble said.

"I ask you to approve this package so that we can prevent Cyprus undermining the progress made in stabilising the eurozone," he added.

Separately, Schaeuble asked for the Bundestag to approve a seven-year loan extension for Portugal and Ireland, who "adopted a lot of reforms in the last years" and "deserve our respect."

MPs approved the request with similarly high majorities: 496 votes in favour for the loan extension for Portugal, 498 for Ireland.

The Social-Democratic opposition, while criticising the way Schaeuble handled the negotiations on the Cypriot bailout - which in a first version would have touched on all deposits on the island - approved the deal out of "European solidarity."

"We have to show solidarity with Cyprus, but not with tax evasion and money laundering," said SPD chief Frank-Walter Steinmeier.

He said the SPD got what it wanted as the Cypriot government agreed to impose losses on rich depositors and to increase the corporate tax, as well as accept an external audit on how banks implement rules against money laundering.

The only group having voted against the bailout was the leftist Linke, who criticised the German government for "dismantling the social systems" in all the bailed out countries and protecting "big banks" at the expense of the people on the street.

Linke MP Gregor Gysi also pointed out that an upcoming vote in the Cypriot parliament may thwart the deal. "Let's wait and see what happens," he said.

A vote will "for sure" take place later this month, but no date has been set yet, a Cyprus government spokesman told this website.

The government counts on a thin majority in the 56-seat parliament: 29 would be in favour, whereas the anti-bailout opposition can count on 27 votes.

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