Cyprus, awaiting big international bailouts as for its banks to be saved after suffering huge losses when the Greek government imposed big hits on holders of Greek bonds, is not a hub for money laundering, Finance Minister Vassos Shiarly said as he urged the Eurozone to provide quick help.
Cyprus applied for financial aid last June after its banks losses, but some Eurozone countries are uneasy over giving money to a country where they fear there’s not enough accountability “Nobody has proved so far that we offend against the rules or even support money laundering,” Shiarly told Der Spiegel magazine in an interview. “We see our future as a serious financial center. That΄s why we want to be one step ahead of our European partners in financial market regulation in future.”
Shiarly said money laundering existed everywhere, including in Germany, but that Cyprus was fighting it resolutely. In November, 2012, Der Spiegel had cited a German intelligence agency report as saying “Russian oligarchs, business people and Mafiosi” would benefit most from any bailout and that Cyprus was a “gateway for money laundering in the EU”.
But while German Chancellor Angela Merkel called on Cyprus to move forward with its own obligations and reforms, she also said European Union states must show solidarity, apparently giving conditional support to a bailout for the island, Reuters reported. Finance Minister Wolfgang Schaeuble said later that unless the Cypriot government could show it was sticking to money laundering rules “we have no desire for a race on who is willing to do something first”.
The Cyprus bailout could be as high as 17 billion euros ($22.7 billion) equivalent to the country΄s entire Gross Domestic Product (GDP.) That is worrying Eurozone officials who are anxious whether the loan could be repaid with Cyprus in such a dire condition.
A number of lawmakers from Germany΄s parliament, which would have to approve any bailout, have already voiced concerns about a rescue for Cyprus, one of the bloc΄s smallest economies and a popular tax haven for wealthy Russians. Cyprus says it fully complies with international rules against money laundering and that its double-taxation avoidance treaty with Moscow and low tax rate give it a competitive edge. Outgoing President Demetris Christofias, a Communist educated in Russia, is seeking a loan from that country as well.
Shiarly rejected demands to raise the corporate tax rate, saying it was discussed intensively when Cyprus joined the EU and found not to be a problem. But European Central Bank board member Joerg Asmussen told Der Spiegel that Cyprus would need to do more before financial aid could flow. “My impression is that improved transparency of the financial sector will be decisive for member states to agree to a program,” Asmussen was quoted as saying.
The results of an asset review of Cyprus΄ banking sector are due on Jan. 18 and Eurozone finance ministers will discuss the country΄s aid request at a regular meeting in Brussels on January 21. No decision is expected from that meeting. Shiarly said the island state΄s parliament had agreed all conditions set by international lenders for a bailout. “Given the uncertain situation, a quick decision by the Eurogroup is necessary to stabilise market confidence,” the finance minister added.
Ratings agency Moody΄s slashed Cyprus΄ credit rating by three notches to Caa3 last week, taking it further into “junk” territory, and said it saw an even chance of a default. Debt restructuring has been ruled out as an option by both Nicosia and Brussels, with European Economic and Monetary Affairs Commissioner Olli Rehn quoted as saying that a ΄haircut΄ was not under consideration.