Cypriot minister defends island against money-laundering charges

Cyprus' finance minister has insisted that the island’s banks were not a hub for money laundering and eurozone peers should decide quickly on the indebted island's bailout bid. The minister's position comes amid increasing reluctance in the German Bundestag to bail out Cyprus.

Cyprus applied for financial aid last June after its banks suffered huge losses on a EU-approved writedown of Greek debt, but some eurozone states have voiced unease about bailing out a country they say must improve financial transparency.

"Nobody has proved so far that we offend against the rules or even support money laundering," Finance Minister Vassos Shiarly told Der Spiegel magazine in an interview published Sunday (13 January).

"We see our future as a serious financial centre. That's why we want to be one step ahead of our European partners in financial market regulation in future," he told the weekly.

Shiarly said money laundering existed everywhere, including in Germany, but that Cyprus was fighting it resolutely.

In November, Der Spiegel had cited a German intelligence agency report as saying "Russian oligarchs, business people and mafiosi" would benefit most from any bailout and that Cyprus was a "gateway for money laundering in the EU". According to the report, about €20 billion were deposited in Cyprus in 2011 by Russian oligarchs.

But while German Chancellor Angela Merkel on Friday called on Cyprus to move forward with its own obligations and reforms, she also said EU states must show solidarity, apparently giving conditional support to a bailout for the island.

Finance Minister Wolfgang Schäuble said later on Friday that unless the Cypriot government could show it was sticking to anti-laundering rules, "we have no desire for a race on who is willing to do something first".

A potential rescue bill of €17 billion, equivalent to the country's entire economic output, has deepened concerns among EU partners about Cyprus' debts, and some doubt it would be able to repay the aid without more concessions from lenders.

Will the Bundestag ratify the bailout?

A number of lawmakers from Germany's parliament, which would have to approve any bailout, have already voiced concerns about a rescue for Cyprus, a popular tax haven for wealthy Russians.

Cyprus says it fully complies with international rules against money laundering and that its double-taxation avoidance treaty with Moscow and low tax rate give it a competitive edge.

Shiarly rejected demands to raise the corporate tax rate, saying it was discussed intensively when Cyprus joined the EU and found not to be a problem.

But European Central Bank board member Jörg Asmussen told Der Spiegel that Cyprus would need to do more before financial aid could flow.

"My impression is that improved transparency of the financial sector will be decisive for member states to agree to a programme," Asmussen was quoted as saying.

The results of an asset review of Cyprus' banking sector are due on 18 January and eurozone finance ministers will discuss the country's aid request at a regular meeting in Brussels on 21 January. No decision is expected from that meeting.

Shiarly said the island state's parliament had agreed all conditions set by international lenders for a bailout.

"Given the uncertain situation, a quick decision by the Eurogroup is necessary to stabilise market confidence," the finance minister added.


Speaking in Cyprus on 11 January, at a congress of the centre-right European Peoples' Party, German Chancellor Angela Merkel called on Cyprus to undertake reforms, AFP reported. She did not elaborate.

Merkel also gave her full support to Nikos Anastasiades, leader of the Cyoriot centre-right party DISY and minister in the current government, and added that she was confident that he would win the presidential election.

Russian Finance Minister Anton Siluanov said on 11 January his country was ready to loosen the terms under Cyprus had to repay a loan of 2.5 billion euros ($3.32 billion) which the island nation received from Russia in 2011, AFP reported.

He made no reference to discussions of any potential future loans.


Cyprus, which joined the EU in 2004 and became a eurozone member in 2008, held the EU presidency in the second half of 2012.

The entire island of Cyprus is officially EU territory, but the country is divided. Turkey, an EU candidate, doesn’t recognise the Republic of Cyprus and has occupied the northern part of the island since 1974.

The Turkish intervention was a response to a coup d’état on 15 July 1974 by the Greek military junta and a move to unite the island with Greece. On 20 July the Turkish army invaded the island with 30,000 soldiers. Three days later, a cease-fire was agreed. By then, 37% of the island was controlled by Turkish forces and 180,000 Greek-Cypriots had been evicted from their homes in the north.

Cyprus is heavily exposed to the Greek crisis and needs to salvage its banking system.


  • 17 Feb.: Presidential election in Cyprus, with possible second round on 24 Feb.

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