Broad Majority German Parliament Approves Cyprus Bailout
The Bundestag, Germany's parliament, voted Thursday to approve a 10 billion euro European Union and IMF bailout for Cyprus. Legislators also voted in favor of seven-year extensions for crisis loans provided to Ireland and Portugal.
Germany's parliament on Thursday approved the planned bailout for Cyprus. In a vote in the Bundestag, the aid program obtained a clear majority after most members of the opposition Social Democrats (SPD) and Greens voted to approve it. The bailout legislation received 487 votes in favor and 102 against it, with 13 abstaining.
German Finance Minister Wolfgang Schäuble of the conservative Christian Democratic Union (CDU) said the billions in aid for Cyprus are necessary in order to ensure the stability of the entire euro zone. "We must prevent Cyprus' problems from becoming problems for the other countries," he said on behalf of the government of Chancellor Angela Merkel. Schäuble warned there was a "significant risk" of contagion, especially to Greece and other vulnerable euro-zone countries.
Levy a 'Huge Mistake'
Despite his faction's broad support, SPD's party whip Frank-Walter Steinmeier accused Merkel's government of management failures in the way it handled the Cyprus crisis. He said the mandatory levy originally planned even for small-scale depositors had been a "huge mistake." Nevertheless, the SPD cast its votes Thursday in favor of the bailout.
Opponents of the bailout packaged failed in an attempt on Wednesday night to halt the vote after the Federal Constitutional Court in Karlsuhe rejected a petition to delay it. The court did not provide information on who had filed the petition.
Under the bailout package, which is currently undergoing the mandatory approval process in euro-zone national parliaments, the European Union's permanent euro bailout fund, the European Stability Mechanism (ESM), and the International Monetary Fund (IMF) will provide Cyprus with a 10 billion ($13 billion) loan. The loan conditions stipulate that the country must radically restructure its banking sector. A mandatory levy must also be applied on bank accounts with large deposits in the country. Through the deposit tax and other measures, Cyprus is expected to raise 13 billion in additional funds for the bailout on its own.
The Bundestag also approved on Thursday an extension of the maturity dates on bailout loans issued to the euro-zone countries Portugal and Ireland beginning in 2011. A broad majority within Merkel's conservatives, the business-friendly Free Democratic Party, the SPD and the Greens voted in favor seven-year loan extensions for the countries.
dsl - with wires