Doing away with speculation that had arisen over the last few days, Cyprus President Nicos Anastasiades said his country has no plans of leaving the European single currency. Cyprus will remain part of the Euro, and no way will the government “experiment with the future” of the country.
On an optimistic note, Mr. Anastasiades also said that the financial situation in Cyprus is now “contained,” because of the 10 billion Euro bailout deal the island nation successfully struck with the other Eurozone nations and the International Monetary Fund. “We have averted the risk of bankruptcy,” the President said. Cyprus had, indeed, come very close to losing the bailout package: this loss would have meant inevitable financial meltdown for the nation.
Banks had remained closed in Cyprus for more than a week, and reopened on Thursday to witness long queues of people waiting to transact business with them. By Friday, however, things seemed to be returning to normal, with bank employees observing normal working hours and the depositors remaining calm.
As regards the capital controls which had been put in place in Cyprus, the central bank, Bank of Cyprus, says that monetary transactions using debit cards and credit cards are free of all restrictions now. For transactions that involve a foreign element, a monthly limit of 5,000 Euro per person will be observed. Cheques are still not being encashed by Cypriot banks.
These controls, says Foreign Minister Ioannis Kasoulides, will slowly be lifted over the time span of a month. However, some experts opine that Cyprus may have to let the capital controls stay for a longer time period if it wants its economy to make a recovery.
The President also talked of how the other Eurozone nations pressurized Cyprus in certain ways with regards to the bailout package. The German-led block of Eurozone made “unprecedented demands that forced Cyprus to become an experiment.”
Mr.Anastasiades was referring to how Cyprus has become the first EU nation that has had to put in place capital controls. Greece, Portugal and Spain are also struggling in crisis-hit Europe, but none of them has had to enforce such extreme measures as Cyprus.
To clinch the bailout deal, Cyprus has to raise 5.8 billion Euro. To achieve this target, Cyprus will shut down its second largest bank, the Cyprus Popular Bank, or Laiki, and split its deposits into two parts. The deposits greater than 100,000 Euro will be subject to a one-time tax at the rate of 20-24 percent. Similar measures will be imposed in other banks, but with lower rates of interest. The Parliament in Cyprus had angrily rejected a plan to impose such a tax on small savers with deposits less than 100,000 Euro.