On Tuesday, more businesses and shops on this Mediterranean island were asking customers to pay by cash only. And thousands of students descended on Cyprus’s parliament to protest against the “troika” of international lenders, who are demanding a percentage of bank deposits in exchange for a $13-billion bailout to save the island nation’s economy from collapsing.
“I am against the troika. They closed our banks. They are taking our money,” said student Fofi Sanida, 18, as she waved a Cypriot flag. “My parents have money in the bank. My parents are losing money needed for my education.”
Under the terms of the agreement hashed out late Sunday by the so-called “troika” — the International Monetary Fund, European Commission and European Central Bank — Cyprus’s banking sector will be gutted.
Exact terms of the rescue plan have not been released, leaving Cypriots and foreign investors alike anxious. However, a confidential memo obtained by the BBC says controls to prevent a run on banks are expected to include a ban on cashing cheques, a limit on exporting euros and a cap on weekly bank withdrawals.
As well, a levy of anywhere from 20 to 40 per cent is expected to be imposed on bank balances over €100,000 ($131,000).
The big banks here have been a tax haven for foreign investors for decades, a situation the European Union will no longer tolerate.
Cypriot banks hold deposits in excess of $68 billion, an amount nearly eight times the size of the country’s economy. Europe is demanding rules be tightened to stop the practice and bring Cypriot banking in line with EU standards.
In a televised address Monday evening, President Nicos Anastasiades promised a criminal investigation into how the banks were able to carry on as they have, largely unchecked.
On Tuesday, Andreas Artemis, the chair of the Bank of Cyprus, the country’s largest bank, tried to resign in response to the bailout plan, which includes restructuring his bank and splitting and divesting Laiki, Cyprus’s second biggest bank, into two. Deposits of less than $131,000 would go to the new “good” bank, while larger deposits, subject to the levy, would go to the “bad” bank.
There were conflicting reports on whether the Bank of Cyprus had accepted Artemis’s resignation.
British citizen Tony Winton, who operates a construction business in Cyprus, called the situation frustrating, likening it to a “communist country” where the government can do whatever it wants.
He questioned why Cypriot officials would agree to a poorly designed rescue plan. “Is there really such a thing in life as ‘good’ and ‘bad’ banks?”
The country, he said, has assets it could have sold off — airports, offshore gas interests — to raise money but instead the government decided to go after those with money in the bank.
Winton’s friend, fellow Brit Steve Kenyon, put it simply: “This is theft.”
They both fear a recession will now hit the island. Many Cypriots agree, predicting a rough financial road ahead as Cyprus tries to restructure and the European Union struggles to remain in control of the euro.
Elsewhere, European and Asian markets struggled after Dutch Finance Minister Jeroen Dijsselbloem indicated in an interview with Reuters that taxing uninsured bank deposits greater than $131,000 could be a “template” for future bailout plans for troubled eurozone economies.
Dijsselbloem, who also heads the eurozone group of finance ministers, later retracted that statement but the damage had been done. The message heard by the markets was there will be no more bailouts in Europe without bail-ins.
As citizens lined up Tuesday at ATMs to take out as much cash as they could, it was unclear exactly how much money is left in Cypriot banks. There is now a €100 daily limit on withdrawals. Most of the cash being dispensed is in €50 notes as some machines appear to have run out of €20s.
Stella Renco, 28, has come every day to the Bank of Cyprus for the past two weeks, withdrawing as much as she could from her account.
“We need cash. You can’t pay in some shops without it … if you want to fill your car with gasoline they only take cash now,” she said.
Chaos is expected if the banks do reopen on Thursday as scheduled.
Original Article
Source: thestar.com
Author: Tanya Talaga
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