Cypriot banks reopen after nearly two weeks

Cyprus was braced for the reopening of its banks after nearly two weeks on Thursday, after the government imposed tough capital controls for at least the next seven days.

Banks will open their doors to customers from noon (1000 GMT) to 6 pm but there will be severe restrictions on transactions, including a daily withdrawal limit of 300 euros (383 dollars) per person per day.

Banks have remained closed since March 16 and officials have imposed a 100 euro daily withdrawal limit.

Police were going from bank to bank in central Nicosia to prevent problems, while dozens of people had started to queue in front of the banks’ doors.

“Keep calm, please try not to bombard the banks,” said Aliki Stylianou, spokeswoman for the Central Bank of Cyprus.

The European Central Bank (ECB) flew in some 5 billion euros in emergency funding to Cyprus’ central bank.

The money was driven in a heavily guarded convey from Larnaca Airport to the Central Bank in Nicosia, the daily Kathimerini newspaper reported.

Tough restrictions on capital movements

The Central Bank of Cyprus said bank transfers and credit card payments would be limited to 5,000 euros per month while no checks will be cash, although they can be deposited in bank accounts.

Payroll payments will be allowed in order to help businesses, which have suffered huge losses as people cut down on spending amid the uncertainty about the banks.

Citizens would also only be allowed to take up to 1,000 euros per person with them every time they leave the country while no fixed-term deposits can be terminated prematurely. Students studying abroad will be allowed no more than 5,000 euros every three months for living expenses.

Any export revenues must be reported to the authorities within two weeks, while Cypriots who sell their homes will be obliged to have the money deposited into their domestic accounts within a two-month period to prevent the transfer of funds to overseas accounts.

Reports said the restrictions will be in place for at least a week until the situation stabilises.

The restrictions on capital flows come after Cyprus avoided a financial meltdown earlier in the week by sealing a 10-billion-euro bailout from international lenders.

The deal agreed by eurozone finance ministers would shrink the banking system and force large losses on depositors at the country’s two largest lenders, Bank of Cyprus and Laiki.

The board of directors of both banks have been fired and new administrators appointed to handle the restructuring and absorption, reports said.

In Berlin, meanwhile, German Chancellor Angela Merkel said that a levy on wealthy bank depositors in Cyprus was a one-off move and not an example to be followed elsewhere.

The comment dissociated Germany from a statement on Monday by Jeroen Dijsselbloem, who heads the Eurogroup of finance ministers, in which he suggested the Cypriot bailout deal should become a model for future European bank rescues.

“Cyprus is a one-off case,” said Merkel spokesman Steffen Seibert, saying no implications could be drawn from the Cyprus bailout to aid programmes for other nations. “Automatic implications from country one to country two don’t work in Europe,” he added.

Seibert declined to say if his remarks constituted criticism of Dijsselbloem, whose statement in an interview upset investors.

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