Euro meetings to focus on Cyprus, bonus cap

Monday 04 March 2013 18.35
Euro zone finance ministers meet on planned bailout for Cyprus
Euro zone finance ministers meet on planned bailout for Cyprus

Finance Minister Michael Noonan will join his colleagues from the 17-member euro zone area in Brussels today for a meeting focused on agreeing a planned bailout for Cyprus.

Cyprus has been in grave financial difficulty for months because its banks were heavily exposed to Greek debt.

However agreeing on a plan to bolster these failed financial institutions has been difficult, not least because of concerns that EU bailout money would end-up in the pockets of Russian investors who controlled them.

After elections last month, the new Cypriot finance minister will update his euro zone colleagues on how his government views matters such as debt sustainability, privatisation policy and anti-money laundering measures.

France's Pierre Moscovici said ahead of today's meeting that the talks will specifically include the issue of anti-money-laundering policies and their implementation.

Germany and others have raised concerns that Cyprus' banks facilitate money-laundering and tax evasion, asking that any bailout must come with tough oversight.

Cyprus, which rejects the allegations, is seeking a bailout of up to €17 billion - equivalent to its annual economic output - to rescue its banks and keep the government afloat.

Ministers are not expected to make a final decision on Cyprus at their meeting.

Then tomorrow in Brussels, finance ministers from all 27 EU member states will discuss the controversial plan to cap bank bonuses. The proposed deal has received a hostile reaction in London.

A spokesman for British Prime Minister David Cameron said today that the UK government still has "real concerns" about plans by EU countries to cap bankers' bonuses.

The City of London is home to over one third of the global foreign exchange market and is by far the biggest financial centre in the European Union. The British government is worried that EU plans to cap bankers' bonuses could make it less competitive.

London Mayor Boris Johnson has dubbed the policy "moronic" and warned the move would shunt banking business away from London towards Zurich, Singapore and New York, while Cameron has said any regulation needs to be "flexible enough" to allow UK-based banks to continue to compete.

A provisional deal on the cap was agreed last week at the European Parliament, but has yet to be finalised by a majority of EU states.

Ireland, which holds the rotating EU presidency and helped negotiate the deal, has said it will present the deal to EU countries at tomorrow's meeting.

Britain's Finance Minister George Osborne will find it hard to unpick the agreement, which is due to take effect next year, since he cannot block the deal from becoming European law as Britain's blessing is not required.