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Merkel takes a harsh stand on Cyprus

Cyprus seeks a bailout worth 17b euros

Image Credit: Reuters
German Chancellor and Christian Democratic Union (CDU) party leader Angela Merkel
Gulf News

Berlin: German Chancellor Angela Merkel said on Wednesday that Cyprus would not be allowed any exceptional terms from its European partners as it seeks a bailout worth 17 billion euros (Dh81.6 billion, $22 billion).

Speaking after talks with Maltese Prime Minister Lawrence Gonzi, Merkel said: “We are agreed that it is important ... that there are no special conditions for Cyprus.”

“We have generally accepted rules in Europe and we are a long way from finishing the negotiations,” added the chancellor.

Cypriot Finance Minister Vassos Shiarly was expected to hold talks with EU diplomats on Thursday to thrash out the possible terms of a bailout that would be equivalent to an entire year’s output for the tiny island economy.

Although dwarfed by previous European bailouts of Greece or Ireland, the topic of a rescue package for Cyprus was expected to dominate a meeting of Eurozone finance ministers in Brussels on January 21.

However, concrete decisions are unlikely at this gathering, said a well-placed government official in Brussels. “It will take several meetings,” this diplomat said.

German finance ministry spokesman Johannes Blankenheim said that the January 21 meeting would serve to provide “a basis for further discussion” but decisions were unlikely.

“When financial markets are nervous, the bankruptcy even of a small country can led to negative contagion effects. We must bear this in mind,” Blankenheim told a regular government news conference.

Cyprus has already pushed through tough austerity measures to meet the demands of Eurozone creditors for more than one billion euros in cuts and savings.

Parliament has approved public sector salary cuts, a freeze on index-linked wages until 2016, extended emergency salary contributions in the public and private sectors, and increases in duty on cigarettes and petrol.