Cyprus finalizes capital controls
March 27, 2013
The troubled eurozone nation Cyprus on Wednesday scrambled to finalize capital controls to avert a run on banks, a day before they are due to reopen. Banks have been closed on the island for nearly two weeks while the country secured a huge bailout.
Finance Minister Michael Sarris said he expected the control measures, which aim to limit foreign transactions and capital outflows but not the movement of money within the country itself, to be ready by Wednesday afternoon.
"Banks will open on Thursday ... 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 said in a Cyprus television interview.
Meanwhile, the euro hit a four-month low of $1.27930 as investors and economists worry the plan could become a blueprint for any future eurozone bailout. This concern comes despite attempts by some officials to dismiss the idea.
The eurozone and International Monetary Fund (IMF) on Monday agreed to a deal to give Cyprus some 10 billion euros ($13 billion). The deal stipulates that further funding should be raised via a levy on bank accounts of more than 100,000 euros at the countries two largest lenders.
Separate banks, separate plans
The current bailout now requires that the island's second largest bank, Laiki, be closed. The island nation's central bank on Monday appointed Andri Antoniades as special administrator for that task.
Meanwhile, the largest lender, Bank of Cyprus, will be recapitalized under the stewardship of administrator Dinos Christofides, who was appointed on Tuesday.
"The appointment of temporary special administrators at both banks aims to facilitate and complete the process of resolution and restructuring of Laiki Bank and Bank of Cyprus respectively," a statement from the central bank said on Tuesday.
Meanwhile, students and bank staff protested outside the presidential palace over the terms of the bailout Tuesday. Journalists from the news agency Reuters estimated that up to 3,000 high school students took part in a show of opposition outside parliament, while some 200 Bank of Cyprus staff demonstrated at the lender's headquarters.
hc/dr (Reuters, AFP, AP)