Greek Cyprus will not quit the euro, vows president

Greek Cyprus will not quit the euro, vows president

NICOSIA - Agence France-Presse
Greek Cyprus will not quit the euro, vows president

Greek Cypriot President Nicos Anastasiades addresses a conference of civil servants in Nicosia March 29, 2013. Cyprus has no intention of leaving the European single currency, the island's president said on March 29, assuring Greek Cypriots the situation was "contained" in the wake of a tough bailout deal with the European Union. REUTERS photo

President Nicos Anastasiades vowed on March 29 to keep Greek Cyprus in the euro but had harsh words for international lenders behind the huge bailout that saved the island from bankruptcy.

The central bank later lifted curbs on domestic credit card payments and said it would make daily efforts to relax the wider controls that it imposed to avert a bank run, the first of their kind in the eurozone.

The finance ministry announced on March 29 night that restrictive measures were being extended by five days, with a central bank spokeswoman clarifying that this meant through next week. "The week after, we will review the situation," said Aliki Stylianou.

Banks resumed normal trading hours on March 29 the day after they reopened peacefully following a nearly two-week shutdown as Greek Cyprus negotiated a 10-billion-euro ($13-billion) rescue package.

The deal with the "troika" of the European Union, European Central Bank and International Monetary Fund imposed a levy on large deposits, causing jitters among other eurozone strugglers and worrying investors.

Rightwinger Anastasiades, who was elected in February on the back of a promise to secure a bailout for the small eastern Mediterranean island, said the deal had saved Greek Cyprus from "economic collapse." "We will not leave the euro and I stress that," he told a conference of civil servants. "We will not engage in risky experiments that will endanger the future of our country." But he criticised other eurozone states for enforcing the tough terms of the deal agreed with the troika after all-night talks in Brussels on March 25.

"Nobody can ignore the insensitivity of our partners," he said. He also took aim at international lenders and at the previous government for pouring money into the country's second largest lender Laiki, or Popular Bank, which will be wound up under the terms of the bailout.

Anastasiades received the backing of visiting Swedish Foreign Minister Carl Bildt, who tweeted that the EU "pumped money into (an) unsustainable situation" and "could have pulled the plug earlier." The bailout calls for severe cuts to Cyprus's prized tax-haven style banking system -- bloated with Russian money and exposed to toxic Greek debt -- and also threatens to deepen the economic recession the island was already suffering.

Banks return to normal

The most controversial element is the unprecedented raid on deposits over 100,000 euros. Laiki, or Popular Bank, is to be wound up, and deposits there over over that amount could be lost altogether. At the Bank of Cyprus, the country's largest lender, the hair cut is expected to be around 40 percent. That sparked fears that savers would make a run on the banks when they reopened on March 28.

But the panic never materialised, and the banks returned to normal opening hours on March 29.

Withdrawal and transfer limits have made it hard for small businesses to pay salaries and for families to make rent payments, especially as both tend to fall around the end of the month.

The central bank then moved to ease fears that the harsh controls it imposed to stop a bank run could last for far longer than their official period of one week.

"Each day, we will measure and look to refine or relax these controls with the overriding goal of safeguarding and stabilising the Greek Cypriot financial system," the bank said in a statement.

Hours earlier the central bank issued a decree removing the 5,000-euro ceiling on credit and debit card transactions within the country.

However, draconian controls still remain in place including a daily withdrawal limit of 300 euros and bans on cashing cheques or taking more than 1,000 euros in cash out of the country. Foreign Minister Ioannis Kasoulides has said restrictions could last for up to a month.

Greek Cyprus remains under global scrutiny as the latest test of the eurozone's viability.