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RUSSIA

Russian mafia ‘would win from Cyprus bailout’

Wealthy Russians, including mafiosi, would most benefit from an EU bailout to Cyprus, Der Spiegel magazine reported Monday, quoting a German intelligence agency report.

Russian mafia 'would win from Cyprus bailout'
Photo: DPA

“The BND report shows who will profit most from the billions in European taxpayer funds -Russian oligarchs, businesspeople and mafiosi who have parked their illegal earnings in Cyprus,” the magazine said.

The magazine reported that a large number of Russian businessmen have placed large sums of money in Cypriot banks, attracted by lower tax rates, even if Cyprus has shed its reputation as a tax haven since joining the EU in 2004.

In total, around €20 billion ($26 billion) was deposited in Cyprus in 2011 by Russian oligarchs, which is more than the island nation’s gross domestic product of €17.8 billion, the BND report found.

These deposits will be guaranteed if a European bailout is approved to shore up the island’s banks.

The BND, Germany’s federal intelligence service, also accused Cyprus of continuing to provide opportunities for money laundering.

Cyprus government spokesman Stefanos Stefanou said the report that the

island was a money laundering centre was “slanderous” and aimed at “damaging” its reputation as a foreign investment hub.

“Cyprus has adopted and implemented high-level institutional frameworks in combating money laundering which is fully in line with EU law,” Stefanou told

reporters.

Nicosia had been congratulated for taking such action by the International Monetary Fund (IMF) and G20 countries.

Stefanou said Russian investment was due to the “attractiveness of Cyprus’ financial system and the advantages of Cyprus such as having double taxation

treaties with many countries including Russia.

“This includes a system of information exchange between Cyprus and other countries which fully complies with international standards,” added the spokesman.

Officially, Cyprus is sticking to all agreements on combating money laundering.The necessary laws have been passed and institutions have been set up.

But there are problems with their implementation and the rules are not being applied properly, the BND said in the report.

It said money laundering has been facilitated since Cypriot authorities made it easy for rich Russians to obtain citizenship.

The BND said 80 oligarchs had managed to gain citizen access to the entire EU in this way.

On Monday, a spokesman for the German Finance Ministry told a regular news briefing that the issue of money laundering would be discussed between Cyprus

and the so-called troika of international creditors, the EU, the IMF and the European Central Bank (ECB).

Both the ECB and the EU Commission in Brussels declined to comment on the magazine report.

AFP/mbw

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ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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