Cyprus capital controls 'may last a month'

The BBC's Tim Willcox was in the city of Nicosia when the banks opened their doors to customers

Restrictions on cash withdrawals, money transfers and the movement of cash in and out of Cyprus could remain in place for a month, the foreign minister says.

Ioannis Kasoulides said capital controls would be lifted gradually, appearing to contradict earlier estimates that curbs would end in days.

He spoke at the end of a first day of operations in almost two weeks for the country's crisis-hit banks.

Earlier, the president praised Cypriots who queued in orderly fashion for cash.

Nicos Anastasiades hailed the country's "maturity and responsibility" on a day that saw many wait to access their cash.

Cyprus capital controls

Laiki Bank branch in Nicosia, 28 March
  • Daily withdrawals limited to 300 euros
  • Cashing of cheques banned
  • Those travelling abroad can take no more than 1,000 euros out of the country
  • Payments and/or transfers outside Cyprus via debit and or credit cards permitted up to 5,000 euros per month
  • Businesses able to carry out transactions up to 5,000 euros per day
  • Special committee to review commercial transactions between 5,000 and 200,000 euros and approve all those over 200,000 euros on a case-by-case basis
  • No termination of fixed-term deposit accounts before maturity

The government has appointed three former supreme court judges to investigate possible criminal activity in the crisis.

The tight capital controls were put in place after a 10bn-euro bailout deal was agreed with the EU and IMF.

Withdrawals over 300 euros are banned, and there are limits on moving money.

Branches were replenished with cash overnight and police were deployed amid fears of a run on the banks.

Some queues did form but the mood was generally calm.

Branches began to open at noon local time (10:00 GMT) and closed at 18:00 (16:00 GMT).

Some did not open on time, causing tension among customers. The longer queues formed outside branches of Laiki, which is being wound up.

Some armed police were deployed in cities and hundreds of staff from the private security firm G4S are guarding bank branches and helping to transport money.

One customer in a queue in Nicosia told the BBC's Tim Willcox he was withdrawing the allowed daily amount of 300 euros ($383; £253) but would take out all of his money if he could.

Our correspondent says the predictions of a stampede did not materialise and in some places there were more journalists than depositors.

Another customer, jewellery shop owner, Roula Spyrou, told AFP news agency: "There's going to be queues so I'm not going to spend so many hours there to get 300 euros."

Loss of trust

Cyprus is the first eurozone member country to bring in capital controls.

Cyprus needs to raise 5.8bn euros ($7.4bn; £4.9bn) to qualify for a 10bn-euro bailout from the European Commission, European Central Bank and the International Monetary Fund, the so-called troika.

As part of the bailout plan, depositors with more than 100,000 euros will see some of their savings exchanged for bank shares.

An earlier plan to tax small depositors was vetoed by the Cypriot parliament last week.

As it became clear that calm was being maintained, President Nicos Anastasiades tweeted his gratitude.

"I would like to thank the Cypriot people for their maturity and collectedness shown in their interactions with the Cypriot Banks," he wrote.

Officials later confirmed that the president would take a 25% pay cut, with cabinet ministers accepting a 20% pay cut.

The stock exchange, shut since 16 March, remained closed on Thursday and will not reopen until after Easter.

In a statement issued on Wednesday, the ministry of finance insisted the capital control measures were temporary and were needed to "safeguard the stability of the system".

They would be reviewed each day, the ministry said.

But Mr Kasoulides, the foreign minister, appeared to contradict this in remarks to reporters on Thursday.

"A number of restrictions will be lifted and gradually, probably over a period of about a month according to the estimates of the central bank, the restrictions will be fully lifted," Reuters quoted him as saying.

The severe new rules have been imposed to prevent a torrent of money leaving the island and credit institutions collapsing.

As well as the daily withdrawal limit, Cypriots may not cash cheques.

Payments and/or transfers outside Cyprus via debit and or credit cards are allowed up to 5,000 euros per person per month.

Transactions of 5,000-200,000 euros will be reviewed by a specially established committee, with applications for those over 200,000 euros needing individual approval.

Travellers leaving the country will only be allowed to take 1,000 euros with them.

Many economists predict the controls could be in place for months.

The unprecedented restrictions represent a profound breach of an important principle of the European Union, says the BBC's economics correspondent Andrew Walker.

That principle holds that capital, as well as people and trade, should able be to move freely across internal borders, he says.

However, the European Commission said member states could introduce capital controls "in certain circumstances and under strict conditions on grounds of public policy or public security".

But it added that "the free movement of capital should be reinstated as soon as possible".

One employee of the Bank of Cyprus told the BBC that everybody's jobs were at risk.

"If the Bank of Cyprus collapses, all the small business, the large businesses, everything collapses. They cannot buy anything, import anything, export anything. There is nothing," she said.

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