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Germany approves bailout but will Cyprus?

Thursday, Apr 18, 2013 - 02:15

April 18 - Germany's lower house of parliament voted overwhelmingly in favour of granting Cyprus a 10 billion euro bailout that is designed to stop bankruptcy for the tiny Mediterranean island and keep it in the euro zone. But Cyprus' own parliament has announced it will vote on the deal, stoking uncertainty over the rescue. Joanna Partridge reports

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Overwhelming support from Germany for Cyprus' 10 billion euro bailout. The lower house of parliament approved the rescue package, designed to prevent the island going bankrupt and keep it in the euro zone. German Finance Minister Wolfgang Schaeuble said failure to back the bailout could lead to financial chaos. SOUNDBITE: GERMAN FINANCE MINISTER WOLFGANG SCHAEUBLE SAYING (English): "It needs to be made clear that if Cyprus were to go bankrupt, there would be a high risk of contagion for Greece, but also for countries who are in a programme and other countries which are seen as nervous on the financial markets. They would be affected by the negative signals, or renewed doubts about the integrity of the euro zone and this could threaten the market access of other states." Despite Berlin's backing, there's fresh concern whether Cyprus will approve the bailout, which will impose major losses on depositors. In a surprise move, Cyprus announced it will also vote on the deal. Early indicators suggest nearly half the island's parliament would be against it. Laurence Mutkin from Morgan Stanley thinks Cyprus will follow the road to a bailout, even if there are bumps along the way. SOUNDBITE:Laurence Mutkin, Global Head of Rates Strategy, Morgan Stanley, saying (English): "It would not be too surprising if there are howls of protest sort of throughout the process. But there's a difference between believing that those bumps will happen and believing that Cyprus really can't follow the path. And I think where the markets sits is that uncomfortable, unpleasant though this path is for the people of Cyprus, any alternative would be worse for them." Schaueble says the health of the euro zone is of vital importance for all its members. For the moment, it looks like the German economy is still relatively immune to euro zone woes. The country's leading economic institutes say domestic demand is boosting growth, and the economy is expected to expand by 0.8% this year. But other core countries aren't faring as well. The IMF's outlook for France is less positive - it expects it to be in recession for the whole of 2013.

Germany approves bailout but will Cyprus?

Thursday, Apr 18, 2013 - 02:15

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