Cyprus is set to restrict the flow of cash from the island and may curb the use of Cypriot credit cards abroad as it tries to avert a run on its banks after agreeing a tough rescue package with international lenders.
A Greek newspaper published details of what officials told Reuters was as yet only a draft government decree to restrict outward payments to documented imports and limit how much people could take abroad in banknotes or spend on credit cards.
With banks due to reopen on Thursday after nearly two weeks, Finance Minister Michael Sarris said capital controls would be “within the realms of reason.” But Cypriots, fearing for their savings and angered by the bailout deal struck on Monday in Brussels, are expected to besiege lenders in the morning.
Athens newspaper Kathimerini, citing the government decree, said measures would remain in force for seven days after the banks reopen. Cypriots wanting to send money overseas would have to prove that the transactions meet strict rules laid out by the authorities. The decree allows businesses to pay for imports if they provide officials with the necessary documentation.
The use of credit and debit cards overseas would be restricted to €5,000 ($6,383 U.S.) per month, and individuals travelling abroad could take a maximum of €3,000 on each trip. Funds deposited with banks for a fixed term cannot be withdrawn early.
Officials at the Cypriot central bank and finance ministry told Reuters that the newspaper report was based on draft proposals and a final version had yet to be adopted.
Cypriots have taken to the streets of Nicosia in their thousands to protest against a bailout deal that will push their country into an economic slump and cost many their jobs.
Some 500 protesters marched from the EU offices in Nicosia towards the presidential palace on Wednesday. Waving banners and flags, they chanted: “I’ll pay nothing; I owe nothing.”
European leaders said the deal averted a chaotic national bankruptcy that might have forced Cyprus out of the euro.
“We will look at the best way to limit the possibility of large sums of money leaving, and not imposing punitive conditions on the economy, businesses and individuals,” Mr. Sarris told local television.
The central bank governor said earlier that “loose” controls would apply temporarily to all banks, which have been shut since final bailout talks got under way in mid-March.
Speaking after meeting government officials, the head of the Cyprus chamber of commerce said: “We have been assured that limitations will not affect transactions within Cyprus at all.”
“Where there will be limitations is on what we spend abroad and also on capital outflows,” Phidias Pelides told reporters.
Russia, whose citizens have billions of euros in Cyprus and use Cypriot banks to move money around even among Russian firms, cautioned Nicosia against imposing onerous controls on healthy banks and noted that Moscow was reviewing loan terms to Cyprus.
“If there are such measures, this will not foster trust but only provoke additional problems for participants, depositors,” Russian Finance Minister Anton Siluanov said on Tuesday.
He cautioned that Russian willingness to restructure and extend a €2.5-billion euro loan made to Cyprus in 2011 would depend on the island’s decision on capital controls.
“We will discuss [restructuring of the loan] in the context of the decisions the parliament adopts,” he said. “We are prepared to discuss within these parameters.”
State-controlled Russian bank VTB has a subsidiary in Cyprus, Russian Commercial Bank, which has not been directly affected by a bailout deal which focuses on big local banks that lost badly in the restructuring of debts in neighbouring Greece.
The terms of the €10-billion rescue from the European Union, International Monetary Fund and European Central Bank have stirred popular anger within Cyprus at the country’s partners in the EU, notably Germany, the bloc’s main paymaster and fiercest advocate of austerity.
On Tuesday, many hundreds of high school students protested at parliament, in the first major expression of popular anger since the bailout was agreed in the early hours of Monday in Brussels. The deal largely side-stepped the Cypriot parliament, and has triggered opposition calls for a referendum.
“They’ve just got rid of all our dreams,” said one student, named Thomas.
Outside the central bank on Tuesday, about 200 employees of the country’s biggest commercial lender, the Bank of Cyprus , demanded the resignation of central bank governor Panicos Demetriades, chanting “Hands off Cyprus” and “Disgrace”.
Dimos Dimosthenous, a veteran Bank of Cyprus employee, said: “The bank is being driven to closure. That will be the end.”
A Bank of Cyprus official said its chief executive, Yiannis Kypri, had been removed on the orders of the central bank.
It follows the appointment of a special administrator to run the bank, which is being restructured as part of the bailout deal, and an offer to resign by its chairman, Andreas Artemis.
The second-largest lender, Cyprus Popular Bank, also known as Laiki, is to be shut down, and accounts of under €100,000 and some loans will be moved to the Bank of Cyprus. Deposits at both banks over the €100,000-euro mark, which is an EU benchmark for state insurance, will be frozen.
Government officials have estimated that these larger depositors, many of them wealthy foreigners including Russians, could lose around 40 per cent of their cash.
On Wednesday, the government was appointing special crisis teams of economic experts to advise ministers.
Many Cypriots say they do not feel reassured by the bailout deal, however, and are expected to besiege banks as soon as they reopen after a shutdown that began over a week ago.
A 42-year-old Romanian hotel maid, who gave her name as Maria, said she was worried she would not be able to cash her pay cheque due on Friday. The hotel, she said, was unable to pay staff in cash because most guests paid by credit card.
“What will I do?” she asked. “Hold up the cheque and look at it?”