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Europe

Cypriot banks reopen amid tight security

© Nathalie Savaricas

Text by Nathalie SAVARICAS

Latest update : 2013-03-28

Banks in Cyprus reopened on Thursday after a 12-day lockdown, with tight controls imposed on transactions to prevent a run on deposits. The streets of the capital Nicosia remained calm, however, despite initial fears that the banks would be swarmed.

Cyprus banks reopened under armed guard on Thursday after a nearly two-week lockdown but customers faced harsh curbs to stop them draining the island's coffers after its eurozone bailout.

The streets of the capital remained calm despite fears that savers would rush to withdraw cash. Camera crews swarmed Nicosia's central Eleftheria Square, desperately looking for queues of distraught, panicked account holders.

Two pensioners outside a Laiki bank branch in Nicosia
© Photo by Nathalie Savaricas

The banks opened at 12:00 p.m. (1000 GMT) for the first time since March 16, with small, patient crowds assembled outside the front doors of both Laiki and Cyprus banks at Eleftheria Square. But at Laiki bank the management would only allow four people to go in at a time. A Laiki employee came out to answer worried clients' questions - some cash machines would only dispense €100 instead of the decreed €300.

Two pensioners sitting outside Laiki said they came mainly out of curiosity over the media presence.

"I never trusted banks -- anyway we only have debt at Laiki Bank,"  joked Andreas, 72.

Haralambos Polyvos, 63, could only withdraw €100 from the ATM, and said he plans to go back later in the day to withdraw more of his savings.

Haralambos Polyvos could only withdraw €100 from the bank's ATM
© Photo by Nathalie Savaricas

"We know we can only withdraw small sums but people aren't panicking -- there will only be crowds," the pensioner said, money clasped in hand.

Abraham, 77, came half an hour before the banks were set to open to avoid potential queues. He was very relaxed about the situation.

"I am not really worried about it all, I just need to shop for a few things and then I'll withdraw my savings when they eventually lift the controls," he said.

Banks were handing out lists of the controls including a daily withdrawal limit of 300 euros ($385), imposed to prevent a run on the banks that could wreak havoc on the east Mediterranean island's already fragile economy.

Five shipping containers reportedly filled with billions of euros were delivered to the central bank late Wednesday, an AFP photographer said. A helicopter and police cars accompanied the cash convoy.

The Cyprus stock exchange remained closed.

Most banks in Nicosia had between one and three guards posted at their entrances in the early morning, some of them carrying weapons -- an alien sight in the generally peaceful tourist island.

There were queues of up to 25 people at other banks.

'Wads of money'

Cypriot authorities appealed on television late Wednesday for people to give priority to the elderly as many do not have credit cards and have to withdraw their money over the counter.

Roula Spyrou, 50, a jewellery shop owner, said she would not bother going to the bank. "There's going to be queues so I'm not going to spend hours there to get 300 euros," she said.

The restrictions -- which last for a week before they will be reviewed -- also ban the cashing of cheques and ordered those travelling abroad not to take more than 1,000 euros out of the country.

Under a deal agreed in Brussels on Monday, Cyprus must raise 5.8 billion euros to qualify for the full 10-billion-euro loan from the "troika" of the European Union, European Central Bank and International Monetary Fund.

Depositors with more than 100,000 euros in the top two banks -- Bank of Cyprus (BoC) and Laiki or 'Popular Bank' -- face losing a large chunk of their money.

Banking employees' union ETYK said staff were ready to go back to work but urged the public not to blame them for the tight controls. Unlike in other European countries, Cypriot tellers are not housed behind glass barriers.

Monday's deal kept the Mediterranean island from crashing out of the eurozone -- but it has provoked fury at home.

Finance Minister Michalis Sarris said on Wednesday that Cyprus "will see worse days in 2013... the economy will go into deeper recession."

On Wednesday, around 1,500 anti-austerity protesters marched on the presidential palace.

Bank workers could be among the worst hit by the bailout as it demands major reforms to its banking system, which is heavily dependent on Russian money.

The bailout involves restructuring the Bank of Cyprus and eventually winding down Laiki, whose "good" assets will be absorbed by the bigger bank. BoC's chief executive was sacked on Wednesday.

Cyprus is the first eurozone country to impose capital controls after bailouts -- unlike Greece, Spain, Portugal and Ireland, which have also received multi-billion-dollar rescue packages.

As well as raising concerns that other countries could face similarly harsh bailouts in future, the move has raised fears that it could effectively create "two euros" as euros trapped in Cyprus are effectively worthless.

But the European Commission said on Thursday there was "a matter of overriding public interest" in imposing the controls to maintain the stability of the financial system and of Cypriot banks.

(FRANCE 24 with wires)

Date created : 2013-03-28

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