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Cyprus braces for banks to reopen and capital controls to begin

Protesters cast their shadows on a Cypriot flag during an anti-bailout rally outside the presidential palace in Nicosia on Wednesday.

Banks in Cyprus are due to open on Thursday for the first time since March 15 as Nicosia becomes the first government in the eurozone to impose capital controls in an effort to prevent a collapse of the island’s financial system.

Lenders will open their doors to customers from noon to 6 p.m. local time but there will be severe restrictions on what Cypriots will be able to do with their money, including a limit of 300 euros per person per day on cash withdrawals.

Finance Minister Michalis Sarris was to issue a decree on Wednesday imposing capital controls, which means checks can be deposited but not cashed. The transfer of money abroad will be severely limited, with Cypriot students abroad not being able to receive more than 10,000 euros per quarter.

Savers will not be able to redeem time deposits before maturity. Those leaving the country will not be allowed to carry more than 3,000 euros in cash on them per trip. The capital controls apply to all accounts, payments and transfers, regardless of currency used.

Cyprus kept its banks closed for eight working days as it negotiated a bailout with the troika that will involved Cyprus Popular Bank (Laiki) being closed down and Bank of Cyprus being restructured.

Sarris said Laiki depositors faced losses of up to 80 percent on deposits above 100,000 euros. Bank of Cyprus savers have been warned they may lose 40 percent of their uninsured savings.

The opening of the banks in Cyprus comes amid a tense political atmosphere, with MPs from President Nicos Anastasiades’s DISY party calling for Central Bank Governor Panicos Demetriades to resign. The conservative politicians accused him of acting in the interests of the European Central Bank rather than Cyprus. Lawmakers from opposition parties questioned whether Sarris should remain in his job.

There was a sense of relief in Athens on Thursday after the Greek branches of Cypriot banks reopened after 11 days without any signs of a bank run.

Prime Minister Antonis Samaras reportedly stressed to ministers that the absence of panic was no reason for complacency and asked them to seek a swift resolution in talks with troika envoys next week on the streamlining of the civil service and on a new unified property tax.

ekathimerini.com , Wednesday March 27, 2013 (21:34)  
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