[credit provider=”Carsten Koall/Getty Images”]
A reminder for everyone shocked by the terms of Cyprus’ bailout this weekend — back in November German paper Der Speigel leaked a German intelligence report that said a bailout of Cyprus’ banks would be a bailout for Russian oligarchs and mafiosi that take advantage of the island’s lax immigration laws to keep money there.The report was a huge hint that German politicians (and the troika officials that were privy to the study) were going to give a Cypriot bank bailout special consideration. It was filed by Germany’s international spy agency, the Bundesnachrichtendienst (BND).
Once the report was out, it put the German government in an “awkward position” with “considerable political risks”, Der Speigel wrote.
That’s why the terms of Cyprus’ deal hit savers so hard. All Cypriot bank deposits with over 100,000 euro are subject to a 10% per cent tax, more than 500,000 euro deposits are subject to a a 15% tax. If an account has less than 100,000 euro, it’s subject to a 3% per cent tax.
According to the BND, Russians have $26 billion deposited in Cyprus’ banks, with $80 billion flowing through the system in 2011 alone.
Money laundering is facilitated by generous provisions for rich Russians to gain Cypriot citizenship, according to the BND which found that some 80 oligarchs have gained access to the entire EU in this way…
Germany’s opposition Social Democrats, which have voted in favour of previous bailouts in the crisis, are determined to challenge Merkel this time and to attach conditions to their approval of support for Cyprus.
“Before the SPD can approve loan assistance for Cyprus, the country’s business model must be addressed,” SPD budget expert Carsten Schneider said. “We can’t use German taxpayers’ money to guarantee deposits of illegal Russian money in Cypriot banks…
As one Merkel confidant put it: “Cyprus isn’t an economic problem, it’s long since become a political one.”
Doesn’t sound like Germany has much room to change its mind here.