Banks in Cyprus are to open today at noon, for six hours, with tight controls on money transactions in an effort to prevent the cleaning out of foreign deposits:
Cyprus reopens banks, under strict restrictions – Reuters UK
Cypriots are expected to descend in their thousands on Thursday on banks, which reopen with tight controls imposed on transactions to prevent fleeing depositors from cleaning out the vaults in a catastrophic bank run. The east Mediterranean island fears a stampede at banks almost two weeks after they were shut by the government as it negotiated a 10 billion euro ($12.78 billion) bailout package with the European Union to escape financial meltdown. The rescue deal is the first in Europe’s single currency zone to impose losses on bank depositors, raising the prospect that savers will panic and scramble to get at their cash. Authorities insist that strict rules imposed to prevent a bank run will be temporary, but economists say they will be difficult to lift as long as the economy is in crisis.
More importantly, local businesses face the biggest problem for securing the necessary cash flow to sustain their operations:
Cyprus to limit cash, credit-card use abroad: report – Reuters UK
To allow trade to continue, Cypriot businesses can pay for imports if they provide authorities with the necessary documentation. The use of credit and debit cards overseas is restricted, and individuals travelling abroad can take a maximum of 3,000 euros on each trip. Funds deposited with banks for a fixed period of time cannot be withdrawn early. Officials at the Cypriot central bank and finance ministry told Reuters that the newspaper report was based on draft proposals and a final version had yet to be adopted. Final proposals were expected to be published later on Wednesday, a day before the banks reopen for the first time in 12 days.
On the other hand, Greek depositors have a real problem for transferring their money out of Cypriot banking system:
When the financial crisis hit Greece, pensioner Vasso Zarani moved the money she had carefully saved in the Greek branch of a Cypriot bank over to where she thought it would be safer: Cyprus. Now Zarani does not know where to turn. ”I transferred money to the Bank of Cyprus in Cyprus when the economic crisis started in Greece and we were afraid we would return to the drachma. ”Now we don’t know how we will get it out of there,” Zarani said as she waited anxiously in line with other depositors outside the eight-storey main branch of BoC in Athens. Worried customers at the Greek subsidiaries of the Boc, Cyprus Popular Bank (Laiki) and Hellenic Bank rushed Wednesday to find out what had become of their money as the banks reopened, a day after being taken over by Greek lender Piraeus. ”I want to transfer the money to France, where I have an account because my daughter lives there… If banks in France also collapse, then Germany should be afraid,” Zarani warned. It all feels horribly familiar to many Greeks.
Finally, today is the most important day for testing banks in Cyprus.