Germany approves Cyprus bailout

Helped by the opposition Social Democrats and Greens, German lawmakers from the ruling coalition of Christian Democrats and Free Democrats on Thursday voted in favor of granting Cyprus a financial shot in the arm worth up to 10 billion euros ($13.1 billion) over the next couple of years.

The southern nation will receive a maximum of 9 billion euros from the EU's European Stability Mechanism (ESM) and another billion from the International Monetary Fund (IMF) to get its economy on its feet again.

Cyprus itself will have to raise resources though a one-off tax affecting creditors and shareholders of banks and people with deposits of over 100,000 euros. In addition, Nicosia will have to secure more funds via privatization schemes and the sale of part of its gold reserves. The Laiki Bank will be wound down, while the Bank of Cyprus faces a restructuring program.

No reasonable alternative

Preceding the vote in the Bundestag, German Finance Minister Wolfgang Schäuble defended the rescue package in a government declaration.

"If we do not help Cyprus, the nation would inevitably face bankruptcy," he told lawmakers in Berlin.

Schäuble warned that leaving Cyprus to its own devices would have raised the risk of contagion spreading to other nations at the center of the debt crisis, including Greece, Italy and Portugal. The minister also maintained that Germany was the country that had profited most from the euro, adding that without it, Germans' living standards and the nation's prosperity would be in jeopardy.

Opposition Social Democrat Floor Leader Frank-Walter Steinmeier noted that while his party voted for the bailout, it did not think much of the German government's crisis management. He criticized that Germany played no small role in bringing up the original idea of taxing the deposits even of small savers in Cyprus.

He added that concept had caused a wave of fears and uncertainty across the continent and said he was glad the idea was now off the table.

hg/mz (dpa, AFP, Reuters)