An international bailout of as much as $12.83 billion for Cyprus to prop up its banks pushed to the edge of insolvency by exposure to devalued Greek bonds, could wind up benefiting Russian oligarchs, wealthy business executives and gangsters using the country to launder money, the German magazine Der Spiegel said in a piece on Nov. 4.
The magazine cited a report from Germany’s intelligence agency BND that warned taxpayer money – including from Germans – could wind up in the hands of people who are already super-rich and create another political problem for Chancellor Angela Merkel, who’s already dealing with the Greek economic crisis.
Cyprus is a popular offshore tax haven for Russian businesses seeking protection from their country’s unpredictable investment climate. But Cyprus, which joined the European Union in 2004, says it has strengthened its regulations over the past decade against money laundering and is in full conformity with international rules.
Spiegel, citing the “secret” BND report and European officials, said significant doubts persisted over Cypriot implementation of these regulations. The BND report found that Russian nationals held some $26 billion, or 21 billion euros, in Cypriot bank accounts, Spiegel said, dwarfing both the emergency aid the euro zone is likely to provide and the country’s total national output of about 17 billion euros, some $21.82 billion.
Cypriot authorities do not provide a breakdown of bank deposits based on nationality, but Russians are believed to make up a large proportion of non-domiciled accounts, the news agency Reuters reported. Germany, the Eurozone’s largest economy, would provide more than 2 billion euros towards the expected Cypriot bailout. But Germans are angry about having to stump up billions of euros to rescue Greece and other heavily indebted economies.
Carsten Schneider of Germany’s main opposition Social Democrats, which hopes to oust Merkel’s conservatives in an election due next year, said his party would only vote in Parliament in favor of aid for Cyprus on certain conditions.
He said Cyprus must be ready to adjust its low corporate tax rate and crack down further on money laundering. Germany’s lower House of Parliament, the Bundestag, has to approve the payment of financial aid for euro zone countries.
Cypriot President Demetris Christofias, a Communist who is not running for re-election, has also reached out to Russia for financial aid at the same the country is seeking a bailout from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) but he said he won’t accept the same kind of austerity measures the lenders put on Greece, which has worsened that country’s recession and left 2.34 million people in poverty.