News / Europe

Cyprus Banks to Reopen with Restrictions on Withdrawals

Cyprus Central Bank Governor Panicos Demetriades (L) and Cypriot Finance Minister Michael Sarris listen to reporters' questions during a news conference at the Central Bank of Cyprus in Nicosia, Mar. 26, 2013.
Cyprus Central Bank Governor Panicos Demetriades (L) and Cypriot Finance Minister Michael Sarris listen to reporters' questions during a news conference at the Central Bank of Cyprus in Nicosia, Mar. 26, 2013.
VOA News
Cyprus is imposing unprecedented controls on Cypriot bank depositors withdrawing or moving their money, as it prepares to reopen its banks Thursday.

Cypriot Finance Minister Michael Sarris says the controls are necessary to restore confidence in the island nation's banking system.

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
""We believe that some sort of capital controls that will moderate whatever outflows are bound to happen will restore confidence and they will be removed in a relatively short period of time in agreement with, that I say, the general rules of the eurozone and the European Union," said Sarris.  

Cyprus said travelers leaving the Mediterranean island can take no more than $3,831 to other countries. The restriction comes after Cyprus, one of 17 eurozone nations, secured a $13 billion bailout from its international lenders. As part of the deal, Cyprus agreed to confiscate 40 percent or more from the biggest, uninsured accounts above $130,000 to help pay for the rescue.

One global economics expert, Nicolas Veron of the Peterson Institute for International Economics in Washington, told VOA the controls are the "very sad consequence of the terrible blunder" made by European policy makers earlier this month to tax all Cypriot bank accounts, not just the largest ones. The Cypriot parliament rejected that policy, but the government agreed to the tax on the biggest accounts.

Now, Veron says, the controls are necessary.

He said, “If you don’t impose capital controls, you are sure to have something like a bank run in Cyprus in a disorderly manner.”

Cyprus says the controls will initially be in place for a week, but Veron says he thinks it will be much longer, perhaps several months.

““I think the destruction of trust is with us, and it will be a long time before confidence can be restored in a way that is compatible with the lifting of capital controls,” said Veron.

Cypriot Andrea Kyriakou, 81, carries bags of food distributed to her by the Orthodox church of Cyprus' community charity kitchen in Nicosia, Mar. 27, 2013.Cypriot Andrea Kyriakou, 81, carries bags of food distributed to her by the Orthodox church of Cyprus' community charity kitchen in Nicosia, Mar. 27, 2013.
x
Cypriot Andrea Kyriakou, 81, carries bags of food distributed to her by the Orthodox church of Cyprus' community charity kitchen in Nicosia, Mar. 27, 2013.
Cypriot Andrea Kyriakou, 81, carries bags of food distributed to her by the Orthodox church of Cyprus' community charity kitchen in Nicosia, Mar. 27, 2013.
Cyprus' banks have been closed for nearly two weeks, with depositors facing restrictions on the amounts they could withdraw from automated teller machines, to prevent a massive run on accounts. Cyprus said late Wednesday it is increasing the limit from $128 to $383. But the uncertainty of the bank closures has frustrated Cypriots, including Nicosia resident Andreas Antoniou.

You can't really move, people don't have any money on them to move around, they're scared, there's uncertainty, don't know if banks will open tomorrow or not," said Antoniou.

The head of Cyprus's biggest bank has been fired from his post. Bank of Cyprus chief executive Yiannis Kypri was dismissed by the nation's central bank, following the appointment of a special administrator for the lender. The bank's chairman submitted his resignation after the administrator was appointed, but the bank board rejected his request.

The Bank of Cyprus is being forced to restructure under terms of the rescue package Cyprus reached this week with its European neighbors, the European Central Bank and International Monetary Fund.  The bank will absorb some of the assets of Cyprus's second-largest bank, Cyprus Popular, also known as Laiki, which is being shut down.  

Cyprus is the fifth of the eurozone nations where billions of dollars in bailouts have been needed to ward off bankruptcy, following Greece, Portugal, Ireland and Spain.

Some information for this report was provided by AP and AFP.

You May Like

Video Miami Cubans Divided on New US Policy

While older, more conservative Cuban Americans have promoted anti-Castro political movement for years, younger generations say economically, it is time for change More

2014 Sees Dramatic Uptick in Boko Haram Abductions

Militants suspected in latest mass kidnapping of over 100 people in Gumsuri, Nigeria on Sunday More

Video Cuba Deal Is Major Victory for Pope

Role of Francis hailed throughout US, Latin America - though some Cuban-American Catholics have mixed feelings More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Sudan School Becomes Target of Aerial Attacksi
X
December 19, 2014 12:45 AM
The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Putin Says Russian Economy Will Emerge Stronger

Russian President Vladimir Putin has said his country's sinking economy will not only recover but also become stronger, despite falling oil prices and Western sanctions over Ukraine. VOA's Daniel Schearf reports.
Video

Video Detained Turkish Journalists Follow Teachings of US-Based Preacher

The Turkish government’s jailing of critical journalists has sparked international condemnation and is being seen as an effort to undermine the followers of an ailing Turkish preacher based in the United States. VOA religion reporter Jerome Socolovsky has more.
Video

Video ‘Anti-Islamization’ Marches Increase Tensions In Germany

Anti-immigrant rallies in Germany have been building in recent weeks, peaking Monday night in the city of Dresden where tens of thousands of people turned out to demonstrate against what they call the ‘Islamization’ of the West. Germany has offered asylum to more Syrian refugees than any other country, and this appears to have set off the protests. Henry Ridgwell reports from London.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.
Video

Video Refugees Living in Kenya Long for Peace in the Home Countries

Kenya is host to numerous refugees seeking safe haven from conflict. Immigrants from Somalia face challenges in their new lives in Kenya. Ahead of International Migrants Day (December 18) Lenny Ruvaga has more for VOA News from the Kenyan capital.

All About America

AppleAndroid