Germany stands firm on Cyprus crisis but ready to help

BERLIN: Leading German politicians said on Friday that Cyprus’s proposals for securing a vital international bailout fell short but made clear that Europe’s top economy remained ready to help the eurozone’s smallest.

Chancellor Angela Merkel warned Cyprus against “exhausting the patience of eurozone partners” during a meeting with the parliamentary group of her junior Free Democratic Party coalition partners, participants told AFP.

She also rejected the Cyprus government’s proposal to involve pension funds in the country’s rescue plan, and was reported by participants as saying: “The EU must in no way abandon its principles.”

Merkel said she wanted Cyprus to remain part of the 17-member eurozone, the participants added.

Her spokesman Steffen Seibert later told a regular government news conference that the chancellor had no details on the Cyprus government’s proposals aimed at raising billions of euros to secure a vital EU-IMF bailout.

They are due to be examined in an emergency session of Cyprus’s parliament expected later Friday.

But Seibert added: “The euro countries are reaching out to help Cyprus but according to the same principles and under the same legal stipulations that also applied to the collaboration with other countries.”

German Finance Minister Wolfgang Schaeuble is sceptical about the Cyprus government’s “Plan B” to avoid financial meltdown, the mass-circulation daily Bild reported on Friday.

“Cosmetic changes alone are not enough,” the newspaper quoted Schaeuble as saying, citing government coalition members who took part in a meeting with the minister late on Thursday.

Cyprus “must move and take serious measures” to consolidate its finances, he was quoted as saying.

Schaeuble told reporters Friday that “it may be that we find an agreement” but added that it was “impossible” to say at the moment, adding that telephone conference talks by eurozone finance ministers Thursday, when Cypriot officials laid out their plans, had “brought few new elements”.

And German Foreign Minister Guido Westerwelle expressed concern, saying on ARD public television that the crisis in Cyprus was leading to a “paralysis in the decisions of the European Union”.

But he said the rules drawn up as a response to the eurozone turbulence in the past two years must be adhered to.

“That means we are ready to show solidarity but conversely the countries which are asking for solidarity must also be ready to do their homework,” Westerwelle said.

A key Merkel ally, Volker Kauder, the parliamentary group leader of Merkel’s conservatives, also raised concern about the proposal to set up a “national solidarity fund” which would nationalise pension funds, with bonds issued against future natural gas revenues.

“I don’t believe that this is a constructive proposal,” he said, also on ARD television, but, on a more optimistic note, added: “When the proposal comes, I see good chances. But we are unfortunately not that far yet.”

“I assume that we’ll find an accord. But Cyprus is playing with fire,” he warned.

A German finance ministry spokesman said a proposal to use pension funds as part of the bailout programme had already been rejected by Cyprus’s international creditors European Union, the European Central Bank and the International Monetary Fund last weekend.

The European Union has given Nicosia until Monday to raise 5.8 billion euros ($7.47 billion) to unlock loans worth 10 billion euros or face being choked from ECB emergency funding in a move that would bankrupt the island.