News / Europe

Cyprus Controls Expected to Target Foreign Transactions

Cyprus Crisis Agreement Could Lead to Credit Crunch, High Unemployment
Cyprus Crisis Agreement Could Lead to Credit Crunch, High Unemployment
Reuters
Cyprus is expected to stop people taking their money out of the country but will not restrict dealings at home as it tries to avert a run on its banks after agreeing a tough rescue package with international lenders.
    
Cypriots have taken to the streets of Nicosia in thousands to protest against a bailout deal that will push their country into an economic slump and cost many their jobs.
    
European leaders said the deal averted a chaotic national bankruptcy that might have forced Cyprus out of the euro.
    
Cyprus' Finance Minister Michalis Sarris holds a news conference at the end of a Eurogroup meeting at the European Council building in Brussels, March 25, 2013.Cyprus' Finance Minister Michalis Sarris holds a news conference at the end of a Eurogroup meeting at the European Council building in Brussels, March 25, 2013.
x
Cyprus' Finance Minister Michalis Sarris holds a news conference at the end of a Eurogroup meeting at the European Council building in Brussels, March 25, 2013.
Cyprus' Finance Minister Michalis Sarris holds a news conference at the end of a Eurogroup meeting at the European Council building in Brussels, March 25, 2013.
With banks due to reopen on Thursday after nearly two weeks, Finance Minister Michael Sarris said capital controls will be "within the realms of reason'' and a business leader said he had been told they would affect only international transactions.
    
"We will look at the best way to limit the possibility of large sums of money leaving, and not imposing punitive conditions on the economy, businesses and individuals,'' Sarris told local television.
    
Speaking after meeting government officials, the head of the Cyprus chamber of commerce said: "We have been assured that limitations will not affect transactions within Cyprus at all.''

"Where there will be limitations is on what we spend abroad and also on capital outflows,'' Phidias Pelides told reporters.
    
The central bank governor said earlier that "loose'' controls would apply temporarily to all banks. Earlier, the finance minister said they could be in place for weeks. Banks have been shut since final bailout talks got under way in mid-March.
    
Russia, whose citizens have billions of euros in Cyprus and use Cypriot banks to move money around even among Russian firms, cautioned Nicosia against imposing onerous controls on healthy banks and noted that Moscow was reviewing loan terms to Cyprus.

"If there are such measures, this will not foster trust but only provoke additional problems for participants, depositors,'' Russian Finance Minister Anton Siluanov said on Tuesday.
    
He cautioned that Russian willingness to restructure and extend a 2.5-billion euro loan made to Cyprus in 2011 would depend on the island's decision on capital controls.

"We will discuss [restructuring of the loan] in the context of the decisions the parliament adopts,'' he said. "We are prepared to discuss within these parameters.''
    
State-controlled Russian bank VTB has a subsidiary in Cyprus, Russian Commercial Bank, which has not been directly affected by a bailout deal which focuses on big local banks that lost badly in the restructuring of debts in neighboring Greece.
    
Popular anger

The terms of the 10-billion euro ($13-billion) rescue from the European Union, International Monetary Fund and European Central Bank have stirred popular anger within Cyprus at the country's partners in the EU, notably Germany, the bloc's main paymaster and fiercest advocate of austerity.
    
On Tuesday, many hundreds of high school students protested at parliament, in the first major expression of popular anger since the bailout was agreed in the early hours of Monday in Brussels. The deal largely side-stepped the Cypriot parliament, and has triggered opposition calls for a referendum.

"They've just got rid of all our dreams,'' said one student, named Thomas.
    
Outside the central bank on Tuesday, about 200 employees of the country's biggest commercial lender, the Bank of Cyprus , demanded the resignation of central bank governor Panicos Demetriades, chanting "Hands off Cyprus'' and "Disgrace''.
    
Dimos Dimosthenous, a veteran Bank of Cyprus employee, said: "The bank is being driven to closure. That will be the end.''
    
A Bank of Cyprus official said its chief executive, Yiannis Kypri, had been removed on the orders of the central bank.
    
It follows the appointment of a special administrator to run the bank, which is being restructured as part of the bailout deal, and an offer to resign by its chairman, Andreas Artemis.
    
Accounts frozen

The second largest lender, Cyprus Popular Bank, also known as Laiki, is to be shut down, and accounts of under 100,000 euros and some loans will be moved to the Bank of Cyprus. Deposits at both banks over the 100,000-euro mark, which is an EU benchmark for state insurance, will be frozen.
    
Government officials have estimated that these larger depositors, many of them wealthy foreigners including Russians, could lose around 40 percent of their cash.
    
On Wednesday, the government was appointing special crisis teams of economic experts to advise ministers.
    
Many Cypriots say they do not feel reassured by the bailout deal, however, and are expected to besiege banks as soon as they reopen after a shutdown that began over a week ago.

The long closure of the banks has hurt business, according to Andreas Hadjiadamou, president of the Cyprus Supermarkets Association, who said consumer confidence had "hit the floor''.
    
Maria Benaki, who runs a family silverware business on Nicosia's biggest shopping street, said she had not had a customer in days.

"The situation is dire,'' she said. "What will happen at the end of the month when I need to pay my bills?''

You May Like

Scotland Vote Raises Questions of International Law

Experts say self-determination, as defined and protected by international law, confined narrowly to independence movements in process of de-colonization More

Video Whaling Summit Votes to Uphold Ban on Japan Whale Hunt

Conservationists hail ruling as a victory, but Tokyo says it will submit revised plans for a whale hunt in 2015 More

Annual Military Exercise Takes on New Meaning for Ukraine Troops

Troops from 15 nations participating in annual event, 'Rapid Trident' in western Ukraine More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Russian Economy Reeling After New Western Sanctionsi
X
September 18, 2014 2:28 AM
A new wave of Western sanctions is hitting Russia’s economy hard. State-owned energy firms continue to bleed profits and Russia’s national currency plunged to a new low this week after the U.S. and the European Union announced new sanctions to punish Russia's aggressive stance in eastern Ukraine. But as Mil Arcega reports, the sanctions could also prove costly for European and American companies.
Video

Video Russian Economy Reeling After New Western Sanctions

A new wave of Western sanctions is hitting Russia’s economy hard. State-owned energy firms continue to bleed profits and Russia’s national currency plunged to a new low this week after the U.S. and the European Union announced new sanctions to punish Russia's aggressive stance in eastern Ukraine. But as Mil Arcega reports, the sanctions could also prove costly for European and American companies.
Video

Video Belgian Researchers Discover Way to Block Cancer Metastasis

Cancer remains one of the deadliest diseases, despite many new methods to combat it. Modern medicine has treatments to prevent the growth of primary tumor cells. But most cancer deaths are caused by metastasis, the stage when primary tumor cells change and move to other parts of the body. A team of Belgian scientists says it has found a way to prevent that process. Zlatica Hoke has more.
Video

Video Mogadishu's Flood of Foreign Workers Leaves Somalis Out of Work

Unemployment and conflict has forced many young Somalians out of the country in search of a better life. But a newfound stability in the once-lawless nation has created hope — and jobs — which, some say, are too often being filled by foreigners. Abdulaziz Billow reports from Mogadishu.
Video

Video A Dinosaur Fit for Land and Water

Residents and tourists in Washington D.C. can now examine a life-size replica of an unusual dinosaur that lived almost a hundred million years ago in northern Africa. Scientists say studying the behemoth named Spinosaurus helps them better understand how some prehistoric animals adapted to life on land and in water. The Spinosaurus replica is on display at the National Geographic museum. VOA’s George Putic has more.
Video

Video Iraqi Kurdistan Church Helps Christian Children Cope find shelter in churches in the Kurdish capital, Irbil

In the past six weeks, tens of thousands of Iraqi Christians have been forced to flee their homes by Islamic State militants and find shelter in churches in the Kurdish capital, Irbil. Despite U.S. airstrikes in the region, the prospect of people returning home is still very low and concerns are starting to grow over the impact this is having on the displaced youth. Sebastian Meyer reports from Irbil on how one church is coping.
Video

Video NASA Picks Boeing, SpaceX to Carry Astronauts Into Space

The U.S. space agency, NASA, has chosen Boeing and SpaceX companies to build the next generation of spacecraft that will carry U.S. astronauts to the International Space Station by the year 2017. The deal with private industry enables NASA to end its dependence on Russia to send space crews into low Earth orbit and back. Zlatica Hoke has more.
Video

Video Future of Ukrainian Former President's Estate Uncertain

More than six months after Ukraine's former President Viktor Yanukovych fled revolution to Russia, authorities have yet to gain control of his palatial estate. Protesters occupy the grounds and opened it to tourists but they are also refusing to turn it over to the state. VOA's Daniel Schearf reports from Mezhigirya, just north of Kyiv.
Video

Video China Muslims Work to Change Perceptions After Knife Attacks

China says its has sentenced three men to death and one woman to life in prison for a deadly knife attack in March that left more than 30 dead and 140 injured. Beijing says Muslim militants from China's restive western region of Xinjiang carried out the attacks. Now, more than six months after the incident, residents in the city are still coping with the aftermath. VOA's Bill Ide has more from Kunming.


Carnage and mayhem are part of daily life in northern Nigeria, the result of a terror campaign by the Islamist group Boko Haram. Fears are growing that Nigeria’s government may not know how to counter it, and may be making things worse. More

AppleAndroid