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No Cyprus aid deal before Feb election - German paper

BERLIN (Reuters) - Cyprus can only expect a bailout in early March after its presidential election next month, German newspaper Handelsblatt reported on Wednesday, citing sources close to negotiations.

Cyprus holds presidential elections on February 17 and 24 and the paper said euro zone finance ministers want to wait to work with the successor of outgoing communist President Dimitris Christofias, who is not seeking re-election.

"The incumbent Christofias categorically rejects the sale of state companies. Without privatization revenues the country cannot be reformed," the paper quoted sources in Brussels as saying.

The head of euro zone finance ministers, Jean-Claude Juncker, said last month the ministers would discuss at their next meeting on January 21 a deal for Cyprus, one of the smallest economies in the 17-nation common currency area.

Cyprus sought financial aid - which could be up to 17.5 billion euros ($22.6 billion), equal to its entire gross domestic product - from the European Union and IMF last June. Its economic woes stem from its banks' heavy exposure to crisis-racked Greece.

Further complicating the outlook for the island, a senior member of Germany's main opposition Social Democrats (SPD) was quoted on Wednesday as saying his party would not support financial aid for Cyprus.

"As matters stand, I cannot imagine that German taxpayers save Cypriot banks whose business model is based on facilitating tax evasion," SPD chairman Sigmar Gabriel told the Sueddeutsche Zeitung daily.

German media has in the past criticized Cyprus's status as a popular tax haven for wealthy Russians and expressed unease about bailing out the country's banks. Cyprus says it is in full conformity with international rules against money laundering.

The centre-left SPD, which hopes to oust conservative Chancellor Angela Merkel in German elections due in September, has taken a hard line against tax evasion, including by wealthy Germans who squirrel away cash in Swiss bank accounts.

Merkel would need SPD votes to secure German parliamentary backing for a Cypriot bailout.

"If Mrs Merkel wants SPD support for a Cyprus bailout package she will need good reasons. At present I do not see them," said Gabriel, whose party is lagging well behind Merkel's Christian Democrats in opinion polls.

Sueddeutsche Zeitung quoted German government sources as saying Merkel would only seek parliamentary backing for a Cypriot bailout if Nicosia embraces "radical reforms".

Merkel is due to take part in a gathering of European Union conservative parties in Cyprus on Friday.

(Reporting by Alexandra Hudson, editing by Gareth Jones/Jeremy Gaunt)

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