German Finance Minister Wolfgang Schaeuble said euro-area finance ministers may hold off on approving aid for Cyprus until there’s a more imminent threat to the currency bloc.
Rescue rules require there to be “a danger for the stability of the euro zone as a whole,” Schaeuble told reporters in Brussels today before a meeting of euro finance chiefs. “This has to be met. We will see.”
Schaeuble signaled that any decision would wait for the outcome of a Cypriot presidential election in February. He said it seemed impossible to reach agreement with outgoing President Demetris Christofias, given the communist leader’s opposition to privatizing state-owned assets.
French Finance Minister Pierre Moscovici said ministers will keep discussing how to work with Cyprus while they gather more information. “We will have to deal with this problem and we will take it seriously,” he said in Brussels today.
Talks between Cyprus, European authorities and the International Monetary Fund have been bogged down for seven months since the island nation’s June announcement that it would seek aid. Negotiations have focused on the size and terms of a rescue for the government and lenders weakened by their exposure to the Greek economy.
Cypriot financial institutions such as Bank of Cyprus Plc and Cyprus Popular Bank Pcl lost more than 4 billion euros ($5.3 billion) in a Greek debt restructuring that was part of a second international rescue of Greece last year.
Cyprus probably won’t reach agreement with European authorities on a rescue package until the new government is in place, an EU official told reporters in Brussels last week. The official said Cyprus is financed “comparatively easily” through March.
Finnish Finance Minister Jutta Urpilainen said today that Russia, which has a big stake in the wellbeing of Cypriot banks, might be able to help the euro zone defray the cost of a rescue.
“The hope is that Russians could participate in financing Cyprus,” Urpilainen told reporters. “My colleagues agree on this quite widely.”
Russian First Deputy Prime Minister Igor Shuvalov said in a Jan. 18 interview that his government isn’t prepared to write off a 2.5 billion-euro loan to Cyprus given in 2011. “We need to be very frugal at the moment, very conservative,” he said.
“I don’t want to provide any money for Cyprus,” Shuvalov said, adding that Russia hadn’t yet responded to a request from the island for a new loan. “We have so many friends and partners who would like to receive some loans from us.”