BRUSSELS: Cyprus is likely to completely lift controls on capital movement within months, finance minister Harris Georgiades said on Friday, ending a controversial chapter in the euro zone’s short history.
Earlier this year, the Mediterranean island became the fifth country in the euro zone to seek an international financial lifeline after it lost billions of euros on Greek bonds.
The aid, however, was given on the toughest terms to date in the euro crisis, forcing the closure of one of the country’s two biggest banks as well as heavy losses on big savers including wealthy foreigners.
To prevent a collapse of its financial system, Cyprus introduced emergency controls on the movement of capital, such as money transfers or cash withdrawals, in March. It has been gradually relaxing those controls ever since.
“Already the restrictions which are in place now are much looser than they were in March,” Georgiades said on the sidelines of a meeting of European Union finance ministers. “The intention is to maintain pace and momentum not in abstract terms, but in very specific terms that will relate to their relaxation and eventually their full lifting. It is a progression of months not years.”
While controls on the movement of capital within Cyprus are already set to be removed early next year, Georgiades’ comments signal that rules restricting the movement of money outside of the country will also soon be lifted.
The full removal of capital controls, the first of their kind since the launch of the euro, could mark a further milestone in overcoming a financial and debt crisis that has dogged Europe for more than half a decade. Financial transactions in Cyprus are now vetted, and there are daily cash withdrawal limits at banks. The latest ECB data shows Cyprus has lost about 30 percent of its deposit base over a 17-month period.
But Georgiades said this was part of the planned scaling down of a once over-sized banking sector. The European Commission, the IMF and the ECB said the country had made good progress in meeting the terms of its $13bn bailout programme.
Reuters
