News / Europe

In Cyprus, The Bank Run That Wasn't

Depositors wait to enter a branch of Laiki Bank in Nicosia, March 29, 2013.
Depositors wait to enter a branch of Laiki Bank in Nicosia, March 29, 2013.
In the end it was hardly even a stroll, let alone the widely predicted run on the banks of Cyprus.

Commentators had been confident that as soon as the banks reopened on Thursday at noon after Cyprus signed a rescue deal with the European Union to stave off national bankruptcy, there would be scenes of chaos.

The experts were right, but it wasn't the Cypriots causing the pandemonium.

Television crews from around the world crowded into tiny Eleftheria Square in central Nicosia, the convenient location of two of the capital's main banks.

If there were a dozen Cypriots waiting patiently to make a withdrawal, there were probably twice as many cameramen, each one as frenzied as the local people were calm.

People sit at a cafe at a central square in Nicosia, March 29, 2013.People sit at a cafe at a central square in Nicosia, March 29, 2013.
People sit at a cafe at a central square in Nicosia, March 29, 2013.
People sit at a cafe at a central square in Nicosia, March 29, 2013.
Reasons for this fortitude are not hard to find in conversations with residents of Nicosia, a sunny and welcoming city with a vibrant cafe culture.

The Greek Cypriots describe themselves as more laid back than their cousins in Greece, where the reaction to the austerity decreed in their own EU rescue deal was mayhem on the streets of Athens.

While a bomb did explode on the day the Cyprus banks ended their two-week closure, the explosion actually happened in Greece.

Cypriots say that they have endured worse, harking back to the war in 1974, when the island was divided after a Turkish military invasion.

Jean Kelly-Christou, editor-in-chief of the Cyprus Mail, the island's oldest newspaper, said people were drawing on the lessons of the economic crisis that followed the war.

"I think most people are being pragmatic about it and understand that demonstrations and anger might make things worse," said Kelly-Christou, who is Irish.

Strict Regime

A strict regime of restrictions on bank transactions, including a daily limit of 300 euros on withdrawals, has been imposed this week, in what is commonly described as an unprecedented move.

Cyprus Bailout

  • Agreed to on March 25
  • Worth $13 billion
  • Keeps Cyprus in the eurozone
  • Closes the island nation's second largest bank - Laiki Bank
  • Laiki accounts larger than $130,000 will be moved to a "bad bank" and used to raise bailout money
  • Laiki accounts with less than $130,000 euros will be moved to Bank of Cyprus
  • Bank of Cyprus will be restructured
Unprecedented in the short history of eurozone bailouts perhaps - but Cypriots recall they had to endure years of currency controls after the 1974 war.

In any case, much of the anger in Cyprus was probably expended before the deal was done in Brussels on Monday.

An initial version envisaged levying a tax on all bank deposits, large and small, and that infuriated small savers on the island. The final agreement, which only hit those with more than 100,000 euros in the bank, was better received.

The restrictions on bank transactions may also have helped calm the mood. After all, if people can't withdraw more than 300 euros a day, it is difficult to have a full-scale bank run.

Most people do not have 100,000 euros in the bank in any case and were taking comfort from the fact that deposits below that level are protected by insurance.

A woman waits for the opening of a branch of Laiki Bank in Nicosia, March 29, 2013.A woman waits for the opening of a branch of Laiki Bank in Nicosia, March 29, 2013.
A woman waits for the opening of a branch of Laiki Bank in Nicosia, March 29, 2013.
A woman waits for the opening of a branch of Laiki Bank in Nicosia, March 29, 2013.
Many of those waiting in line for the banks to reopen were in fact elderly people who had run short of ready cash. They said they were uncomfortable with bank cards and so unable to use the ATMs that had remained in operation throughout.

Others probably realised that they had just as much chance of getting their money later rather than on day one.

"We were planning to take our money out but we're going to wait ... it's going to be chaos today," Constantina Economidou, a civil servant, said on Thursday.

High Finance

Others were equally resigned, or perhaps numbed by the sensation that there were matters of high finance under way which they could not do much about.

"The government hasn't told us exactly what's happening so people don't know how to react," said Patra Michaelides, 45, a teacher. "We're at a loss. Should I be hopeful or worried?"

Theodora Kyprianou 72, who owns a souvenir shop stacked high with unsold T-shirts, hats and souvenirs of Cyprus, said the general calm when the banks reopened did not surprise her.

"We're civilized here - what did people expect? The problem isn't big - it's very big. But what can we do about it," she asked with a shrug.

Cyprus President Nicos Anastasiades addresses a conference of civil servants in Nicosia, March 29, 2013.Cyprus President Nicos Anastasiades addresses a conference of civil servants in Nicosia, March 29, 2013.
Cyprus President Nicos Anastasiades addresses a conference of civil servants in Nicosia, March 29, 2013.
Cyprus President Nicos Anastasiades addresses a conference of civil servants in Nicosia, March 29, 2013.
There is also national pride at work. President Nicos Anastasiades praised his compatriots for their maturity and responsibility, while ordinary people said they had posted messages on Facebook urging Cypriots not to give the foreign media the satisfaction of seeing the country unravel.

"You may have the euros, but we have the culture," said the front page headline in the daily Politis, above photos of people queuing outside banks.

There have been street protests, but they have been limited in scope and certainly not violent.

"Cypriots are non-violent by nature. Just take a look at the vandalism and street protests in Greece. You have none of that here. This is a completely different mentality," said political scientist Hubert Faustmann of the University of Nicosia.

He said Cyprus was a small country, and if you took to the streets in protest, "you could be taking it out on your neighbor's brother-in-law."

"Also, there is a realisation that deep down, things were not perfect here," he said of a country whose overgrown banking sector was eight times the size of its economy.

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Comment Sorting
by: NVO from: USA
April 01, 2013 12:48 AM
Then, when the Fed’s fire hoses started spraying an elephant soup of liquidity injections in every direction and its balance sheet grew by $1.3 trillion in just thirteen weeks compared to $850 billion during its first ninety-four years, I became convinced that the Fed was flying by the seat of its pants, making it up as it went along. It was evident that its aim was to stop the hissy fit on Wall Street and that the thread of a Great Depression 2.0 was just a cover story for a panicked spree of money printing that exceeded any other episode in recorded human history.

by: jkjk:l from: cYPRUS
March 31, 2013 1:08 PM
Large and corrupt governments love to use the magic of the false choice. For instance, “…it is better to sacrifice some of your money and your principles to the establishment than it is to live through total collapse of the nation…” This false choice process, though, never ends. The offending government will demand more property and more freedom from the citizenry everyday while constantly warning that if we do not submit, the alternative will be “far worse”.

The truth is, Cyprus is not the issue. What the disaster in Cyprus reflects, however, concerns us all. It is a moment of precedence; an action which sets the stage for the final destruction of the idea of private property. It dissolves one of the final barriers to total government control. Governments and elitists have always stolen from the public through misspent taxation and rampant inflation, but with Cyprus, we see a renewed feudalistic paradigm. The EU and the banking hierarchy are sending a message to the Western world: You are now their personal emergency fund, and nothing you own is actually yours anymore.

by: nvo from: USA
March 31, 2013 1:06 PM
Just to be clear, any sizable Russian funds being stored in Cyprus were removed before the bailout measures were instituted. Therefore, the assertion that such people were “punished” is a lie and a distraction. The Russian scapegoat was merely being promoted by global financiers and political elites in order to con people around the world (not just those in Cyprus) to accept the concept of government theft of private funds as being “moral” under “certain extraneous circumstances”. When a government wants you to set aside your conscience in support of an immoral action that serves their interests, they will almost always conjure a false villain and engineered consequences for you to direct your fear and anger at. Once they can convince you to abandon your own principles to smite an imaginary enemy or avoid a manufactured threat, even if only one time, it will be much easier for them to convince you again a second time.

by: VOA from: LIES!
March 31, 2013 12:55 PM
Realizing the insanity of their solution – and sensing a popular revolt – the EU and Cyprus’ government switched to a second version of insanity. They revised the terms of their heist. Now the first 100,000 euros ($130,000) in savings would be exempted. But anyone with a larger bank account could lose 30% to 40%.

You can imagine the rage from Russian millionaires — and the terror struck into the hearts of every single person, rich or poor, across Europe who lives under the increasingly powerful, unaccountable, whimsical rule of politician-bankers. Let’s call those rulers “banksters,” because after their Cyprus raid, that’s just accurate.

Remember, this theft was excused because Cyprus’ depositors weren’t really Cypriot. But after the banksters got away with this without riots, they realized they had a new, lucrative model. And so the Dutch chairman of the eurozone — the countries that use the euro — told reporters that raiding bank accounts of savers could be repeated across Europe, in places like Italy and Spain, too.

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