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With limits on cash withdrawals, Cypriot banks reopen calmly

The restrictions on withdrawals, cashing of cheques and taking money abroad will be lifted within a month, the country’s foreign minister said today.

People are served in a branch of Bank of Cyprus in Nicosia earlier today
People are served in a branch of Bank of Cyprus in Nicosia earlier today
Image: Petros Karadjias/AP/Press Association Images

CYPRIOTS STAYED CALM as banks reopened today after a nearly two-week lockdown, with the first capital controls of their kind in the eurozone saving the island from a catastrophic bank run.

President Nicos Anastasiades tweeted his thanks to the citizens of the bailed-out eastern Mediterranean nation for their “maturity” after they patiently queues outside banks that had been shuttered since 16 March.

Dozens of people were waiting when bank doors opened at 10am GMT, but the lines had vanished when they closed six hours later, and security guards at most branches had little to do.

World stocks were largely up and the euro recovered versus the dollar.

The €10 billion EU-IMF rescue agreed with Cyprus on Monday was the first to impose a levy on bank depositors, and Cyprus is the first bailed-out eurozone nation to impose curbs on the movement of money.

Foreign Minister Ioannis Kasoulides said the restrictions could be lifted within a month “if everything goes as well as it did today.”

Banks handed customers lists of the curbs, including a daily withdrawal limit of 300 euros ($385), a ban on cashing cheques and a 1,000-euro ceiling on money being taken abroad by travellers. Some people were even making deposits.

“There is confidence; everything was fine,” unemployed electrician Philippos Philippou told AFP as he emerged from a branch of Laiki bank, which will be wound up under the bailout. Philippou had gone into the bank saying “it will be a very bad day; there will be swearing and a lot of anger.”

Capital controls needed

Officials had said the capital controls were needed to prevent further damage to the fragile economy, which relies on a banking sector bloated with Russian money.

But after the banks reopened, Anastasiades, who was elected only one month ago, gave “sincere thanks and deep appreciation” to Cypriots for not panicking at a “critical time”.

Anastasiades had decided to cut his own salary by 25 per cent, while cabinet members will take a 20 per cent reduction, a presidential aide said.

The cabinet has also appointed three ex-supreme court judges to probe whether “criminal, civil and political responsibilities” were involved in the meltdown, presidential undersecretary Constantinos Petrides said.

Kasoulides, asked whether the probe could lead to arrests, prosecutions and convictions, told journalists: “It is quite possible that this will be the case.”

But while the deal agreed in Brussels on Monday kept Cyprus from crashing out of the euro, the promise of years of future hardship has sparked protests at home.

Kasoulides, referring to a forecast in December that GDP would contract by 3.2 percent in 2013, said “it will definitely be much higher than this.”

Yet he spoke of the “conviction that our banking system, despite the predicament that it has suffered… will stand on its feet, will face the problems.

“This is not the first time that our economy is suffering such an abrupt and violent shock.”

It was “totally destroyed” by the 1974 Turkish invasion, “but the resilience of the Cypriot people managed to rebuild the economy very quickly.”

© AFP, 2013

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