Germany Won’t Block Cyprus Aid If Conditions Are Met

Germany won’t stand in the way of aid for Cyprus so long as the Mediterranean nation fulfills the criteria to qualify for help from Europe’s bailout fund, Deputy Finance Minister Steffen Kampeter said.

Outstanding questions still need to be addressed including Cyprus’s systemic relevance to the euro area, the future size of the country’s banking industry, tax policy and how the Cypriot authorities deal with money “which perhaps isn’t legally sent in” to the island, Kampeter said in an interview in Berlin.

“If the answers are given in a proper way and are impressing our parliament, I don’t see any objections” to a program for Cyprus in the lower house, Kampeter said yesterday.

Kampeter’s comments are the strongest signal yet that Chancellor Angela Merkel’s government won’t risk the market turmoil that could result from any rejection of help for euro member Cyprus. European stocks dropped the most since Oct. 23 on Feb. 4 amid concerns that the debt crisis in the 17-nation euro region might reignite. Germany is Europe’s largest economy and the biggest contributor to euro-area bailouts.

Members of Merkel’s Christian Democratic Union as well as the main opposition Social Democrats have questioned the need to help Cyprus, which represents about 0.15 percent of euro-area gross domestic product. European Central Bank Executive Board member Joerg Asmussen said Jan. 27 that governments have to realize Cyprus has the potential to cause damage beyond the size of its economy.

‘Common Understanding’

Merkel’s coalition and the opposition have a “common understanding” that Cyprus still has to provide information to satisfy the conditions for any bailout, Kampeter said.

“I don’t see anybody in the German parliament who has given a final ‘no’ to the Cyprus call for a program,” he said. “What I see in the German parliament is that we want to have delivered additional information, additional decisions, for example on privatization, by the authorities.”

Merkel, speaking to a CDU event in Bremen late yesterday, underscored the need for reform in some European countries amid a “very tough” debate over the measures to be undertaken.

“I’ve always listened to those who said ‘yes, we need to have solidarity, we belong together -- this currency is important for us all,’” Merkel said. “But I’ve also said that those who don’t change at home -- who don’t do their homework -- it’ll be more difficult to help them. And in the end we’ll all be affected.”

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