A woman gives money to musicians busking in a street in the old part of the Cypriot capital Nicosia yesterday. Businesses and families in Cyprus are suffering despite the return to normal banking hours, as draconian capital controls make it hard to pay salaries and bills, trade groups said.
NICOSIA: The president of Cyprus said yesterday that the risk of bankruptcy had been contained and the country had no intention of leaving the euro, in a speech laden with criticism of Europe’s currency union for “experimenting” with the island’s fate.
Conservative leader Nicos Anastasiades spoke a day after banks reopened following an almost two-week shutdown imposed as the country raced to clinch a rescue package from the European Union.
Officials slapped firm limits on transactions to avert a run on deposits by worried Cypriots and wealthy foreign investors. In the end the reopening of the banks was largely quiet on Thursday, with Cypriots queuing calmly for the ¤300 they were permitted to withdraw.
Anastasiades said the restrictions on transactions — unprecedented in the currency bloc since euro coins and bank notes entered circulation in 2002 — would be gradually lifted. He gave no time frame.
Cyprus’s difficulties have sent jitters around the fragile single European currency zone, and the imposition of capital controls has led economists to warn that a second-class “Cyprus euro” could emerge, with funds trapped on the island less valuable than euros that can be freely spent abroad.
In a speech to civil servants in the capital, Nicosia, Anastasiades hit out at banking authorities in Cyprus and Europe for pouring money into a crippled Cypriot bank that now faces closure under the ¤10bn ($13bn) bailout plan that averted the immediate risk of financial meltdown.
“How serious were those authorities that permitted the financing of a bankrupt bank to the highest possible amount?” Anastasiades said. “I don’t want to say more,” he added. “Now is not the time to say who bears more or less of the blame.”
Anastasiades clinched the last-ditch bailout in Brussels five days ago, but has faced a backlash from Cypriots angry at the price that came with it — the winding down of the island’s second-largest bank, Cyprus Popular Bank or Laiki, and an unprecedented raid on deposits over ¤100,000 that could spell the end of Cyprus as a hub for offshore finance. The country faces steep job losses and a prolonged and deep recession.
The president, barely a month in the job and wrestling with Cyprus’s worst crisis since a 1974 war split the island in two, accused the 17-nation euro currency bloc of making “unprecedented demands that forced Cyprus to become an experiment”. But he added: “We have no intention of leaving the euro. In no way will we experiment with the future of our country.”
European leaders have insisted the raid on big bank deposits in Cyprus is a one-off in their handling of a debt crisis that refuses to be contained.
But policymakers are divided, and the waters were muddied a day after the deal was inked when the Dutch chair of the euro zone’s finance ministers, Jeroen Dijsselbloem, said it could serve as a model for future crises..
The Cyprus rescue differs from those in other eurozone countries because bank depositors have had to take losses, although an initial plan to hit small deposits as well as big ones was abandoned and accounts under ¤100,000 were spared. Warnings of a stampede at Cypriot banks when they reopened on Thursday proved unfounded.
For almost two weeks, Cypriots were on a ration of limited withdrawals from bank cash machines. Even with banks now open, they face a regime of strict restrictions designed to halt a flight of capital from the island.
Yesterday, easing a ban on cheque payments, Cypriot authorities said cheques could be used to make payments to government agencies up to a limit of ¤5,000. Anything more than ¤5,000 would require Central Bank approval.
The bank also issued a directive limiting the cash that can be taken to areas of the island beyond the “control of the Cypriot authorities” — a reference to Turkish-controlled northern Cyprus which considers itself an independent state. Cyprus residents can take ¤300; non-residents can take ¤500. Under the terms of the capital controls, Cypriots and foreigners are allowed to take up to ¤1,000 in cash when they leave the island. Reuters
