BERLIN Nov 9 A key ally of German Chancellor
Merkel expressed reservations on Friday about bailing out Cyprus
because wealthy Russians holding bank accounts on the island
could prove the main beneficiaries.
Cyprus is in talks with international lenders on the terms
of a bailout to total 10 billion euros after its two largest
banks incurred huge losses due to the Greek debt writedown
earlier this year.
"We need to look very carefully at the situation. To be
quite clear, I do not want to guarantee illegal Russian money,"
Volker Kauder, parliamentary floor leader of Merkel's Christian
Democrats, told the online version of Der Spiegel magazine.
Last weekend, Spiegel reported that Germany's intelligence
agency had prepared a report on money laundering in Cyprus that
it said suggested "Russian oligarchs, businesspeople and
mafiosi" would benefit most from any bailout.
Cyprus is a popular offshore tax haven for Russian
businesses seeking protection from their country's unpredictable
But Cyprus, which joined the European Union in 2004, says it
has boosted its regulations over the past decade against money
laundering and is in full conformity with international rules.
It has dismissed the Spiegel report allegations.
Germany, the euro zone'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.
(Reporting by Gareth Jones. Editing by Jeremy Gaunt.)