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Cyprus will not leave euro, president vows

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(Globalpost/GlobalPost)

President Nicos Anastasiades vowed Friday Cyprus would stay in the eurozone despite the harsh terms of a EU-led bailout, as the island's banks resumed normal trading for the first time in two weeks.

Cypriots queued for a second day outside banks -- after they reopened on Thursday following the long lockdown -- with the eurozone's first ever capital controls set to hit people for at least another month.

Anastasiades said the 10-billion-euro ($13-billion) rescue package from the "troika" of the European Union, European Central Bank and International Monetary Fund had saved the Mediterranean island from bankruptcy.

"We will not leave the euro and I stress that," Anastasiades told a conference of civil servants in the capital Nicosia, the Cyprus News Agency reported.

"I repeat, we will not engage in risky experiments that will endanger the future of our country."

The rightwing Greek Cypriot leader criticised the 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 comments by Anastasiades, who has only been in the job for a month, came after an official at a top global grouping of banks said there was still a real chance Cyprus could exit the eurozone.

"This is the first case where you can see some kind of exit as a very distinct possibility," said Philip Suttle, deputy managing director of the Institute of International Finance, which represents some 450 banks worldwide.

Cyprus's banking system -- bloated with Russian money and exposed to toxic Greek debt -- paid a heavy price for the bailout that Anastasiades made it his priority to secure when he was elected on February 24.

It involves the closure of Laiki with the loss of thousands of jobs, cuts to the biggest lender Bank of Cyprus, and a raid on deposits over 100,000 euros.

The banks returned to normal hours on Friday, opening at 8:30 am (0630 GMT) and due to close at 1:30 pm (1130 GMT), but with draconian controls still in place including a daily withdrawal limit of 300 euros ($385).

Small queues built up outside many branches with some banks limiting the numbers allowed in at one time.

The controls were imposed on Wednesday for an initial period of one week in a bid to stop a catastrophic bank run.

Cypriots are already the feeling pinch. Withdrawal limits are making 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.

"There will be some difficulties and discomfort as regards the payment of wages," Michalis Antoniou, assistant director of the Employers’ and Industrialists Federation, told AFP.

More than 100 members of the right-wing nationalist ELAM party demonstrated in central Nicosia on Thursday night chanting slogans such as "Troika, out!" and "This island is Greek!"

Foreign Minister Ioannis Kasoulides said late Thursday the capital controls could be "lifted within a month if everything goes as well as it did" when the banks reopened.

Cyprus remains under global scrutiny as the latest test of the viability of the eurozone. Japanese shares ended higher at the end of quiet regional trade on Friday but the euro edged lower.

Anastasiades received the backing on Friday of Swedish Foreign Minister Carl Bildt who questioned the way that both the previous Cypriot leadership and the EU handled the problems facing Cyprus.

"The question for me here in Cyprus is why one allowed the situation to go on for so long. And then dumped it on new President within days," the Swede tweeted as he ended a visit to Cyprus.

Anastasiades's communist predecessor Demetris Christofias first sought a bailout in June but apparently balked at the tough terms proposed by the troika.

The Cypriot cabinet on Thursday appointed a panel of former supreme court judges to investigate whether criminal activity led to the financial crisis.

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http://www.globalpost.com/dispatch/news/afp/130329/cyprus-will-not-leave-euro-president-vows