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The capital controls put in place by Cyprus to prevent a drain of its banks are justified and in line with European Union law, the bloc’s executive said today, while also calling for the free movement of capital to return as quickly as possible.
“In current circumstances, the stability of financial markets and the banking system in Cyprus constitutes a matter of overriding public interest and public policy justifying the imposition of temporary restrictions on capital movements,” the European Commission said in a statement.
There is a “significant risk of uncontrollable outflow of deposits which would lead to the collapse of the credit institutions and to the immediate risk of complete destabilization of the financial system of Cyprus,” it noted.
But the free movement of capital “should be reinstated as soon as possible” and the commission will monitor the restrictions in Cyprus to make sure they remain “strictly proportionate,” it said.
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