Cyprus finalizes capital controls to avoid bank run
Wednesday, March 27, 2013 - 02:35
March 27 - Cyprus is putting the finishing touches to capital control measures to prevent a run on the banks after the country agreed a painful rescue package with international lenders. As protests gather pace Ciara Sutton reports on what is likely to happen when the banks reopen on Thursday.
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Father of four Sotiris Dimitriades has become dependent on this food bank in Cyprus.
(SOUNDBITE)(Greek) SOTIRIS DIMITRIADES, UNEMPLOYED FATHER OF FOUR CHILDREN SAYING:
"I have a little bit of money in the bank but I cannot get to it because they're closed. Right now I don't have any money so how am I going to get by? How am I going to buy groceries?"
This soup kitchen opened last year, helping 600 families - that's now reached 1,700 as the island struggles with an economic crisis.
The soup kitchen's director expects things to get worse.
SOUNDBITE: SOUP KITCHEN DIRECTOR PANAGIOTIS PANAGIOTOU SAYING (Greek):
"The signs are that the number of families will keep increasing. We receive telephone calls every day from people who are worried they'll lose their jobs and asking if we will be able to give them food."
Banks will reopen on Thursday after being closed for six days.
The government has been scrambling to bring in banking system reforms.
It's finalising capital control measures to prevent money flying out of the country after it agreed a painful rescue package with international lenders.
Cyprus will tax large deposits over 100,000 euros and merge banks, as agreed with the EU and IMF.
Banks are also expected to place limits on withdrawals of money, or what customers can shift between accounts or across borders.
But Nick Beecroft from Saxo Bank is optimistic about the capital control measures.
(SOUNDBITE) (English) NICK BEECROFT, CHAIRMAN & SENIOR MARKET ANALYST, SAXO BANK, SAYING:
"I think they will be successful, because now the ECB liquidity tap is back on again. How long they'll last is a moot point. Some of these temporary measures have become pretty permanent over the years. I suspect once again this will be contained and because of the ECB's backstop, maybe we are only talking about a matter of weeks here rather than months."
Russian citizens have billions of euros in Cypriot banks.
And Moscow is concerned about healthy banks being controlled too.
The bailout package is expected to really hit Cypriots - who are already suffering due to cuts and 15% unemployment.
The country's Parliamentary Speaker says it's facing a vicious circle of recession.
(SOUNDBITE)(English) PARLIAMENTARY SPEAKER YANNAKIS OMIROU SAYING:
"We expected support and understanding from our partners but instead we are subjected to resolution of our financial system and devastating measures leading our country to further recession, unemployment and poverty."
But European leaders say the deal averted a chaotic national bankruptcy that might have forced Cyprus out of the euro.
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