ECB's Draghi, Germany's Schaeuble Clash Over Cyprus Aid
European Central Bank president Mario Draghi has rejected the claim by German Finance Minister Wolfgang Schaeuble that the Cypriot debt issue does not put the Eurozone as a whole in danger, German weekly Der Spiegel reported Sunday, without citing its sources.
A threat to the existence of the Eurozone is one of the conditions that would need to be met before the Mediterranean island would qualify to tap the permanent bailout fund European Stability Mechanism (ESM).
According to the magazine, Draghi told Schaeuble at last week's Eurogroup meeting that Cyprus's two largest banks have a broad network of branches in Greece.
Should customers start to worry that their deposits in these banks are no longer safe then the ensuing uncertainty could spread to the Greek banking system, posing the risk of a severe setback of the situation there.
A Cypriot bankruptcy would also undo the positive news which has led to a calming of the crisis in the Eurozone recently, Draghi warned.
European Monetary Affairs Commissioner Olli Rehn and ESM CEO Klaus Regling supported Draghi's stance at the finance ministers' meeting, Der Spiegel wrote.
Schaeuble argued in an interview with German daily Sueddeutsche Zeitung last week that it remains unclear whether the Cypriot debt issue puts the Eurozone as a whole in danger.
Thus, "we are far from ready to decide on an aid programme," Schaeuble said. He also noted that "an astonishing amount of money from Russian citizens flows back into Russia via Cypriot accounts."
Cyprus has been negotiating with the IMF and the EU since last summer over a rescue package for the government and lenders weakened by their exposure to the Greek economy.