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Cyprus banks to reopen Thursday with tight controls

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(Globalpost/GlobalPost)

Cyprus confirmed that banks would reopen on Thursday after a nearly two-week lockdown on the bailed-out country, but only under the first capital controls of their kind in the eurozone.

Finance Minister Michalis Sarris issued a decree Wednesday for draconian temporary restrictions limiting daily withdrawals to 300 euros ($385), which he said were needed to prevent the "collapse of credit institutions."

The central bank confirmed branches that have been shuttered since March 16 -- leaving desperate Cypriot homes and businesses with limited cash -- would be open from 1000 GMT to 1600 GMT on Thursday.

At least two shipping containers reportedly filled with cash were delivered to the central bank in Nicosia on Wednesday night, an AFP journalist said.

The decree came as around 1,500 anti-austerity protesters marched on the presidential palace to protest the EU-IMF rescue package which delivers a major hit to big bank depositors and will see thousands left jobless.

Protesters chanted "Troika out of Cyprus", substituting "Troika" for "Turkey" in a chant Greek Cypriots traditionally use to condemn the 1974 Turkish invasion.

Under a deal agreed in Brussels on Monday, Cyprus is trying to raise 5.8 billion euros to qualify for a 10-billion-euro bailout from the "troika" of the European Union, European Union and International Monetary Fund.

Depositors with more than 100,000 euros in the top two banks face losing a large chunk of their money while Cyprus agreed to major reforms to its crucial banking system, bloated with Russian money and exposed to Greek debt.

The deal kept the east Mediterranean island from crashing out of the euro but has caused anger at home.

Earlier this week officials had originally said that all banks would reopen on Tuesday, then that Bank of Cyprus and number two lender Laiki would stay closed on Thursday, and finally that all of them would stay shut until then.

"The banks will serve the public tomorrow from 12 noon to 6 pm," central bank spokeswoman Aliki Stylianou told AFP in Wednesday.

The capital controls accompanying the reopening of the banks would last for four days before they were reviewed, Sarris said in a decree.

In addition to the 300-euro daily limit, they ban the cashing of cheques.

They also prohibit people from taking more than 1,000 euros in cash abroad, with customs officers authorised to make checks at border crossings.

Non-cash payments or money transfers outside Cyprus are prohibited, with some narrowly defined exceptions, and there is a limit of 5,000 euros a month in credit or debit card purchases while abroad.

Cyprus is the first eurozone country to impose capital controls after bailouts -- unlike Greece, Spain, Portugal and Ireland, which have also received multi-billion-dollar rescue packages.

Michalis cited the "lack of substantial liquidity and significant risk of deposits outflow, with possible outcome the collapse of the credit institutions" as the reasons for the restrictions.

It said this could cause "chain effects that could lead to systemic instability of the financial system and have destabilising consequences on the economy as a whole."

Bank employees union ETYK said staff were ready to go back to work but warned public not take out frustrations on them, saying that they too were "victims of criminal acts".

Led by the opposition communist Akel party, some 1,500 protesters waved Cyprus and communist flags as they punched their fists in the air and chanted angry slogans against the "troika".

"I'm worried about my pension and, as for the future, it is in trouble, sure," said Andreas Pepetas, 65, an unemployed protester.

Thousands of bank workers and students had rallied in Nicosia on Tuesday.

The bailout involves the restructuring of the Bank of Cyprus and the eventual winding down of Laiki, or Popular Bank. The Bank of Cyprus will absorb the "good" parts of Laiki.

That process claimed Bank of Cyprus chief executive Yiannis Kypris on Wednesday, who was sacked by the governor of the country's central bank.

A day earlier the bank's chairman had his resignation rejected.

Kypris said in a statement that he had been asked verbally to hand in his resignation, adding: "The reason given was the restructuring of the bank under the law approved by parliament and the demand of the troika."

Sarris earlier said Laiki depositors faced losses of up to 80 percent on deposits above 100,000 euros. Bank of Cyprus savers have already been warned they stand to lose 40 percent.

The uncertainty over the situation in Cyprus saw the European single currency fall to under $1.28 for the first time since November while European stock markets slumped.

But instead of stopping contagion the deal has made other struggling eurozone members fear that they could face terms as harsh as Cyprus following comments by Eurogroup chief Jeroen Dijsselbloem on Monday.

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http://www.globalpost.com/dispatch/news/afp/130327/cyprus-banks-reopen-thursday-tight-controls