Cyprus Presents Systemic Threat to Euro Area, Merkel Ally Says

German lawmakers recognize that a collapse in Cyprus’s banking industry would pose a threat to euro-area stability, an ally of Chancellor Angela Merkel said, suggesting that Germany won’t block a bailout package.

The comments by Norbert Barthle, a lawmaker and budget spokesman for Merkel’s Christian Democratic Union-led bloc, are the first by a senior German government official to acknowledge the systemic risk to the 17-nation euro region posed by Cyprus. Germany’s Finance Ministry has said rescue-fund rules stipulate that a country must pose a risk to the stability of the entire region before it can be eligible for bailout loans.