ECONOMY

European Commission clears Cyprus capital controls but says they must be lifted soon

The European Commission said on Thursday that Cyprus has the right to impose capital controls to protect its banking system from collapse but that the restrictions, which are set to apply for at least a week, will have to be lifted as soon as possible.

“Member States may introduce restrictions on capital movement, including capital controls, in certain circumstances and under strict conditions on grounds of public policy or public security,” the Commission said in a statement ahead of banks in Cyprus reopening. “In accordance with the case law of the European Court of Justice, measures may also be introduced for overriding reasons of general public interest.

“Such exception to the principle of the free movement of capital must be interpreted very strictly and be non-discriminatory, suitable, proportionate and applied for the shortest possible period.”

Brussels said the capital controls are planned to last for seven days and that it would monitor the restrictions closely over the next few days.

“The Commission will insist at all times that any restrictive measures are strictly proportionate to the legitimate objectives of preventing the immediate risk to the financial stability of Cyprus and strictly limited in duration to the time necessary for that purpose.

“While the imposed restrictive measures appear to be necessary in the current circumstances, the free movement of capital should be reinstated as soon as possible in the interests of the Cypriot economy and the European Union’s single market as a whole.”