BERLIN Euro zone states including Germany want to make a bailout for Cyprus conditional on the island's banks, and maybe their Russian clients, sharing the cost, but the European Commission fears this could spook investors, according to German media.
Business daily Handelsblatt said Germany was pushing for a so-called "bail-in" to include private investors in the 17.5 billion euro rescue deal for Cyprus, adding that the "most radical option" involved using Cypriot's private bank deposits.
The newspaper, which did not cite any sources for the report, said the German government was pushing this line because Chancellor Angela Merkel was not assured of majority support in the Bundestag lower house of parliament for a Cypriot bailout.
Her own conservatives and the centre-left opposition - which has so far backed her efforts to stabilize the euro zone - are in campaign mode ahead of September's election and fear German voters may consider aid for Cyprus as a bailout of Russians who launder their money in the island's banks.
"Rich Russians should pay for Cyprus," said a front-page headline in the Sueddeutsche Zeitung newspaper. Citing sources in the negotiations with Cyprus, it said euro zone states wanted "rich people and businesses who have stowed their money in Cyprus to share the costs of the planned rescue package".
(Reporting by Stephen Brown; Editing by Noah Barkin)