German politicians voice skepticism on aid for Cyprus

A top member of Chancellor Angela Merkel's Free Democrat coalition partners and several opposition lawmakers said on Sunday they would only agree aid for Cyprus if it tackled money-laundering and implemented structural reforms.

Cyprus has asked the European Union and International Monetary Fund for a bailout but resistance is strong in euro zone paymaster Germany.

Cyprus's problems go back to its banks' exposure to crisis-hit Greece and in Germany much has been made of its status as a popular tax haven for wealthy Russians.

With an election in September, Merkel knows any aid will be a tough sell to voters who are already resentful about helping Greece and other debt-ridden euro zone states.

"We are united with our European partners, but there is no clearly agreed procedure for financial aid from the European Stability Mechanism that applies to Cyprus," Rainer Bruederle, a leading member of the Free Democrats, told Die Welt newspaper.

The FDP shares power in Merkel's center-right coalition and Bruederle is in charge of the party's election campaign.

"One thing is clear: without the introduction of effective controls on money-laundering and urgently needed structural reforms, we need not even discuss financial aid," he said.

Some members of Merkel's own conservatives are also skeptical about granting aid to Cyprus. Finance Minister Wolfgang Schaeuble has said Germany would not be rushed into a decision.

Senior conservative lawmaker Michael Fuchs told Der Spiegel magazine:

"I do not see that Cyprus is system-relevant and only in that case can the European Stability Mechanism help".

Merkel needs the support not only of her coalition partners, but also of the opposition Social Democrats (SPD) to get a deal through the Bundestag, the lower house.

Until now, they have supported Merkel's euro zone policies but they are being more demanding over Cyprus.

Merkel's SPD rival for the chancellorship in the election and former finance minister Peer Steinbrueck also took a tough line at the weekend, saying Nicosia had to consolidate its banks and adhere to other conditions [ID:nL5N0B21KH].

Other SPD lawmakers lined up to stress their reservations.

"Cyprus is based on a business model that damages us all and yet it is now supposed to be saved by the EU. The SPD will not support that. There are limits," Johannes Kahrs, a prominent figure in the conservative wing of the SPD, told Die Welt.

(Reporting by Madeline Chambers; editing by Andrew Roche)