German parliament backs Cyprus bailout

Thu Apr 18, 2013 10:08am EDT
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BERLIN (Reuters) - Germany's lower house of parliament voted overwhelmingly on Thursday to grant Cyprus a 10 billion euro bailout that is designed to avert bankruptcy for the tiny Mediterranean island nation and keep it in the euro zone.

Of the 601 lawmakers present in the Bundestag chamber, 487 backed the rescue, under which Cyprus has agreed to impose major losses on depositors, shutter its second largest bank and raise its corporate tax rate.

Separately, German parliamentarians also backed seven-year loan extensions for bailout victims Portugal and Ireland.

The Cyprus vote was not in doubt given widespread support from within German Chancellor Angela Merkel's center-right coalition and backing by many opposition lawmakers from the Social Democrats and Greens.

However surprise news on Wednesday that the fractious Cypriot parliament is also likely to vote on the deal stoked new uncertainty over the fate of the rescue.

Before the vote, German Finance Minister Wolfgang Schaeuble warned lawmakers that a failure to offer Cyprus aid would unleash contagion across the 17-nation single currency bloc.

"Step by step we are winning back confidence. If you look at the markets, there is still nervousness and uncertainty. But it is considerably less than three years, two years or one year ago," Schaeuble said in a speech.

"The aid for Cyprus secures the successes we've already achieved in the euro zone. We must prevent the problems in Cyprus from unleashing new problems in other euro zone countries."

He said that if Cyprus were allowed to go bankrupt, there was a "significant risk" of contagion to Greece and other vulnerable euro zone member states.   Continued...

German Chancellor Angela Merkel (C) casts her vote during a session of the lower house of parliament Bundestag in Berlin, April 18, 2013. Germany's lower house of parliament voted overwhelmingly on Thursday in favour of a bailout for Cyprus. REUTERS/Fabrizio Bensch