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Cyprus hopes to see more cash controls lifted

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(Globalpost/GlobalPost)

Cypriots hoped for further relaxation of the first capital controls in the eurozone Saturday after authorities on the bailed-out island dropped domestic restrictions on credit card payments.

The central bank said Friday it would make daily efforts to relax the restrictions it has imposed to avert a bank run, after lifting its 5,000-euro ceiling on domestic credit and debit card payments.

The move came after President Nicos Anastasiades said Cyprus's 10-billion-euro ($13-billion) rescue package from the European Union, European Central Bank and International Monetary Fund had saved the country from "economic collapse".

Anastasiades vowed to keep Cyprus in the euro, but had harsh words for the so-called "troika" of international lenders behind the huge bailout.

"We will not leave the euro and I stress that," the rightwinger, elected in February on the back of a promise to secure a rescue package, told a conference of civil servants.

"We will not engage in risky experiments that will endanger the future of our country."

But he criticised other eurozone states for enforcing the tough terms of the deal agreed after all-night talks in Brussels on Monday.

"Nobody can ignore the insensitivity of our partners," he said.

He also took aim at international lenders and at Cyprus's previous government for pouring money into the country's second-largest lender, Laiki, or Popular Bank, which will be wound up under the terms of the bailout.

The rescue calls for severe cuts to Cyprus's prized tax-haven style banking system -- bloated with Russian money and exposed to toxic Greek debt -- and also threatens to deepen the economic recession the small Mediterranean island was already suffering.

The most controversial element is an unprecedented raid on deposits over 100,000 euros.

Laiki is to be shuttered, and deposits there over that amount could be lost altogether.

At the Bank of Cyprus, the country's largest lender, account holders will lose 37.5 percent of their money, according to a document published by private broadcaster Sigma TV that it said was a central bank decree. The document said the lost cash would be converted into shares.

Authorities had feared the levy on deposits would cause savers to make a run on the banks when they reopened on Thursday after a forced closure of nearly two weeks.

But the panic never materialised, and the banks returned to normal opening hours on Friday.

Cyprus however remains under global scrutiny as the latest test of the eurozone's viability.

Draconian controls remain in place, including a daily withdrawal limit of 300 euros and bans on cashing cheques or taking more than 1,000 euros in cash out of the country.

Withdrawal and transfer limits have made it hard for small businesses to pay salaries and for families to make rent payments, especially as both tend to fall around the end of the month.

The finance ministry announced on Friday night that restrictive measures were being extended by five days, with a central bank spokeswoman clarifying that this meant through next week.

"The week after, we will review the situation," said Aliki Stylianou.

Foreign Minister Ioannis Kasoulides has said restrictions could last for up to a month.

Economist Yiannis Tirkides warned that they could last for years.

"These controls, we don't know when they will go away," he told AFP.

"The government says it's for a week. The foreign minister says it might be for a month. But ideally when you implement controls in a country they tend to last for years."

The euro edged slightly higher against the dollar Friday, to $1.2818 at 2100 GMT from $1.2814 late Thursday.

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http://www.globalpost.com/dispatch/news/afp/130329/cyprus-hopes-see-more-cash-controls-lifted