Cyprus bailout deal to tax savers wins support in Germany
The draconian terms of the bailout may have provoked uproar in Cyprus, but the deal has won praise across the political spectrum in Germany.
A Cypriot man protest against the EU bailout deal and German Chancellor Angela Merkel's call for Cyprus to follow economic reforms. Photo: AFP PHOTO/YIANNIS KOURTOGLOUYiannis Kourtoglou/AFP/Getty Images
By Jeevan Vasagar, Berlin Correspondent 11:49AM GMT 18 Mar 2013
Chancellor Angela Merkel has defended the decision to impose a one-off levy on savers in Cyprus, saying this shifted part of the burden from other European taxpayers and made it easier for Germany to approve the deal.
The bailout must be approved by a vote in the lower house of the German parliament, and in previous votes on bailouts Mrs Merkel has faced opposition from rebel Christian Democrat (CDU) MPs who complain that Germany is being made liable for the debts of the rest of Europe.
German suspicions that Cypriot banks are a channel for money-laundering will make it harder to win the vote.
The opposition Social Democrats (SPD) and the Greens have both supported the principle that savers in Cyprus will share in the costs of the bail-out. However both parties have said that they want to see exceptions for smaller savers. The SPD has said that it is awaiting details of the package before giving approval.
Norbert Barthle, budget spokesman for Mrs Merkel’s party, the CDU, said the levy would hit major investors. “As for the small investors, we would like the banks to look into how they can be protected,” he told the Frankfurter Rundschau newspaper.
Green party parliamentary leader Juergen Trittin said in a TV interview on Monday: “Why don’t you take 15pc from those with a lot of money and make savers with less than €25,000 exempt?”
Under the existing bailout terms, small savers would have to pay a one-off tax of 6.75pc. Those with more than €100,000 would pay 9.9pc.
Germany’s finance minister Wolfgang Schaeuble has said the Cypriot business model, of attracting capital with low taxes and light regulation, had proven to be unsustainable.
But offering Cyprus aid was vital to keep the euro together, Mr Schaeuble said. Cyprus, which has the lowest corporate tax rate in the EU, is a favoured offshore centre for Russian businesses.
German politicians are openly suspicious of the high levels of Russian investment in Cyprus.
Last year, Der Spiegel magazine quoted a German intelligence agency report which said that “Russian oligarchs, businesspeople and mafiosi” would benefit most from a bailout.
