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Merkel to Cyprus: 'Talk to Troika not Russia'

The Local · 19 Mar 2013, 12:43

Published: 19 Mar 2013 12:01 GMT+01:00
Updated: 19 Mar 2013 12:43 GMT+01:00

"A telephone call between Mrs Merkel and the Cypriot president took place yesterday evening," the spokeswoman told news agency AFP.

"The chancellor once again emphasised that the negotiations are to be conducted only with the Troika," she added, referring to the term used for the European Union, the European Central Bank and the International Monetary Fund.

The comment was made as the Cypriot finance minister headed to Moscow after an explosion of anger in Russia at the EU bailout deal for the island that could see Russian investors lose billions of euros.

In exchange for a €10 billion ($13 billion) bailout for debt-laden Cyprus agreed by EU leaders on Saturday, a controversial levy will be slapped on bank savings. The move has raised widespread anger in Cyprus, but also in Russia, where investors have placed vast amounts of cash in the island's banks.

The German spokeswoman also declined to say whether the phone conversation

took place before or after Merkel met French President Francois Hollande and

European Commission president Jose Manuel Barroso in Berlin late Monday.

Cyprus Tuesday was reviewing its bailout package ahead of a scheduled parliamentary vote on the deal after the eurozone urged a rethink on the controversial levy on bank deposits.

But German Finance Minister Wolfgang Schäuble said on Tuesday that investors who placed their money in Cyprus in order to pay less tax should shoulder the risks when it comes to a bailout.

"Whoever invests their money in a country where they pay less tax, and perhaps where there is less supervision, shoulders the risk when that country's banks are no longer solvent. That's a fact," Schäuble said in an interview on German public radio Deutschlandfunk.

If investors from Russia and elsewhere were not to foot the bill for the bailout, then it would fall to European taxpayers to pay for the billions of foreign investment in Cyprus, Schäuble said. "That would be irresponsible," he said.

The minister also said that the Cyprus economic model, which used low tax rates to attract foreign money, was "bankrupt".

Story continues below…

The eurozone has told debt-hit Cyprus to revise the controversial levy on bank deposits to allow small savers to escape the tax amid a public outcry and fears of a bank run.

The statement from eurozone finance ministers came Monday after Cyprus baulked at putting the bailout plans to a parliamentary vote, as the growing uncertainty forced a prolonged closure of the island's banks.

Cyprus shut its banks until at least Thursday and delayed a parliamentary vote on the package until Tuesday after large queues formed at ATMs on the island.

AFP/The Local/mb

The Local (news@thelocal.de)

Your comments about this article

12:31 March 19, 2013 by sonriete
He is not being very honest about this, never before have bank deposits been looked at as investments. The Russians deposited all of that money in Cyprus precisely because Cyprus was in the euro zone and they had reason to believe their money would be safe there with all of the protections offered by the EU and the ECB supervision. The Russian deposits did nothing to cause this crisis, in fact it was the troika, by forcing the Cypriot banks to take huge losses on their investments in Greece as part of the Greek bail out that caused the crisis. The euro zone leaders made false promises all along and the blame for all of this lies squarely at their feet, including Schauble himself.
12:50 March 19, 2013 by The-ex-pat
Technically, when you deposit money into a bank it is a loan that has been made to a bank and therefor it is an investment. The problem with this though, it is not possible to not have a bank account today, so the letter of the law, you made a loan to the bank and bank has lost money, well if you invested in a company, you would also not get your money back. However, the letter of the law and what is the honorable thing to do are two different things..................
12:50 March 19, 2013 by Navigator_B
And the Cypriot banks' bondholders (including German banks with their teams of financial experts who should know all the risks) get fully repaid and don't lose a single cent.
13:32 March 19, 2013 by sonriete
Merkel's position that Russia is a "third party" who should be excluded from talks doesn't carry much water either. Russia is a major creditor of the Cyprus government, the troika has publicly stated that they expect Russia to relax the terms of billion in loans Russia has given Cyprus as part of the deal. not to mention that Russian banks and corporations make up to half of all depositors in the Cyprus banks. One wonders if she simply wants to completely destroy EU relations with Russia which is a very important country.
13:39 March 19, 2013 by antistar
The Russians deposited all of that money in Cyprus precisely because Cyprus was in the euro zone and they had reason to believe their money would be …
And why were they depositing that money in Cypriot banks and not German ones? Because Cypriot banks were paying far more interest. Why were they paying far more interest? Because they were a riskier investment.

According to Bloomberg money invested in a Cypriot bank account would have accrued 12% MORE interest than in a similar German account since 2008. That's 12% in *addition* to what you'd earn in Germany.

So if a Russian put money into Cyprus in 2008 they'd be making a profit compared to a German account even after the haircut. And if these investors don't pay anything at all, who will pay instead? German tax payers who have had their money safely in low interest German accounts.
13:44 March 19, 2013 by raandy
Cyprus started using the Euro in 2008. Once this happened Cyprus banking system took it far beyond what a small country could support.The assets ballooned many times greater than their entire economy. Five or so years ago all those Russians with their huge cash surpluses invested billions into Cyprus banks,to avoid taxes.Unfortunately Cyprus banks were investing their depositors money into Greek bonds, which buy any standerd are 'Junk".The banks lost some where around 4.5 billion Euros because of the junk bonds.Now the banks are in so much trouble that the EU, IMF and ECB are putting together a deal to prevent their collapse.The Europeans want the Russian depositors who benefited from these corrupt banks to help cover the cost.

All sounds reasonable to me.
14:10 March 19, 2013 by sonriete
The Russians could have made far more money depositing their money in banks in Beirut which is about 150 km away. They chose Cyprus because it is in the EU and euro zone and they were foolish enough to believe the ECB and EU were doing a responsible job, when in fact they were not. The Greek bonds imploded because Brussels chose to look the other way when the Greek government presented them with cooked books year afte year.
14:48 March 19, 2013 by Bulldawg82
The only Russians pissed off about this are the Russian mob and their many shady corporation that serve only as fronts for their activities. Cyprus is what Cuba used to be (when Batista was in charge) for the US Mafia.
15:34 March 19, 2013 by sonriete
Actually much of the Russian money in Cyprus has been deposited by the largest banks and listed companies, upward of 20 Billion Euros.

The irony for them is that they started doing this after a Russian banking scare some years back in hopes of protecting their money in the supposed safety of the EU. If they had put the money in Beirut, it would still be safe now. How sad that that money is more safe in Lebanon than in the EU! Perhaps you are speaking too narrowly when one compares Cyprus to Batista's Cuba, perhaps you should speak of the whole of the EU, don't forget this money grab condition originated in Brussels, not Nicosia.
16:06 March 19, 2013 by smart2012
Again Verkel creating problems to Europe. Cyprus must talk to Russia as Russia is one of the biggest customers of Cyprus, followed by German banks. And of course 5.8 billions that Germany wants to be collected from the Cyprus bank accounts would cover the German banks credit to Cyprus... And, checked it out, Russia has just located 5 war ships next to the coasts of Cyprus..

Germans, get rid of Verkel, we r getting closer to ww3.

PS. Cyprus is starting to ask for Chinese support
16:48 March 19, 2013 by Istabraq
Well I am taking my money out of the bank and buying gold bars and burying them in a deep and secret spot in my back garden. I always thought banks held deposits on trust for customers and nobody including a government had the right to dip into them. I never give any government the right of a direct debit mandate on my bank account for this reason. They have no right to my money without my express written permission. Obviously the rules are bieng re-written as the Euro crisis rolls along.

How much has gold and silver gone up as a result of this?
17:29 March 19, 2013 by Dalmation
Yeah, well Merkyl has been acting similar to the Russian mafia over the Euro crisis and now she may have met her match by coming up against the real thing.
18:18 March 19, 2013 by simon98
Deutsche Welle 30.10.2012 (http://www.dw.de/germany-a-safe-haven-for-money-laundering/a-16343313) According to a study published by the Tax Justice Network that examined 70 countries, Germany is one of the biggest havens for tax evasion - ranking even before Switzerland, the Cayman Islands, Luxembourg or Jersey.
20:00 March 19, 2013 by jg.
This is a really stupid idea - but the damage has already been done. Everyone now knows that deposits in Cypriot banks cannot be considered safe. If Cyprus is also to be forced to end the favourable corporation tax measures for Cypriot companies which do not trade in Cyprus, there will be no point in in foreigners keeping money there, It seems likely that those who can will remove their money from Cyprus when the banks open on Thursday, including the Russians and their 20 billion Euros. The Russian president has indicated that Russia will also reconsider the terms of a 2.5 billion Euro loan to Cyprus. By my calculations, this means that Cyprus will see 10 billion in from the EU minus 20 billion in Russian bank deposits minus 2.5 billion Euros of Russian government loans - that means they could expect to be up to 12.5 billion Euros worse off after the bailout.

The big problem is that if this can happen in Cyprus, it could happen elsewhere in the Eurozone. Ireland operates a favourable corporation tax scheme for foreign companies, similar to that of Cyprus - perhaps they are next in line. Greece, Italy and Spain are all know to have substantial black economies - will bank accounts in al those countries be raided to pay for their bailouts? The suggestion to raid people's bank accounts in this way has done serious damage to confidence in the integrity of banks across the Eurozone. The troika are imbeciles.
20:07 March 19, 2013 by gorongoza
The moment of truth fast approaching to the Euro Zone. I see it slowly but surely seeping down to the man in the street who , for all along , has been finding it difficult to understand the meaning of the Euro Crisis.

Its only a matter of time. Its like a huge dam of water in a mighty river, threatening to burst. Those in positions of authority have been making frantic efforts plugging the gaps at hot spots on the dam wall. They have been loathe to touch the little man in the street because if they do that this signals the end:the man immediately goes all systems out, all lights out and all hell breaks loose.

Its a time bomb:delaying its explosion is no solution. It will eventually explode after which we will be left with a task to pick up the pieces. From the pieces I hope we will learn a lesson.
21:11 March 19, 2013 by melbournite
Its the whole system (i.e. capitalism) that is corrupt. Its only the honest worker that produces anything and all the rest is exploitation and speculation, creating funny money and moving it around to create the illusion of fabulous riches for a few. The system used to be able to get out of crises in the past by allowing some businesses to go bankrupt. Now however the whole thing has become so entangled that everything threatens to come tumbling down. Yes we will have to pick up the pieces but lets not go down the same failed road again
22:11 March 19, 2013 by sonriete
So they took Merkel's advise and adopted a plan pushed by the troika and froze the Russians out of the negotiations.

The results this evening? In the face of massive public revulsion with the troika plan, the Cypriot Parliament voted, not even one single MP dared to vote yes. Now we have yet another giant crisis for the euro. Yawn.
11:46 March 20, 2013 by murka
"Talk to Troika not Russia" - what delicious irony in the title (Troika is a Russian word)...
13:27 March 20, 2013 by raandy
melbournite capitalism is not perfect, but what would you replace it with?

True enough that since we have gone Global , one major domino in the world wide scheme could bring it all tumbling down at least from an economic stand point.

That" road" is globalization and the believe that we can all live a reasonable life ,with out hunger or fear from our respective governments, have we failed in all areas?
22:43 March 20, 2013 by Theikos_Anemos
i wonder where Germans will go for holidays this summer. Greece? No Portugal? No Italy? No Cyprus? no. They destroyed us with their stupid policies. Now in Greece we have 1.500.000 unemployed and at least 3.500 dead from suicides people are starving . i believe that the uprising and the revolution is coming ....and will knock the doors of Germany soon.
10:36 March 23, 2013 by wethepeople2012
Germany is getting even with everyone for losing WWII-Soon, everyone will be in perpetual debt to Germany. Laughing all the way to the bank :-)
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