Young Cypriots protest as banks stay shut
CYPRIOTS vented anger in the streets today and were desperate to learn what would happen to their savings, with the government yet to reveal details of controls it will impose to prevent a run when banks reopen after a painful bailout.
A special administrator was appointed to run the country's biggest bank, which will take over accounts from the second biggest bank as part of the restructuring package designed to bail out and rein in the oversized financial sector.
Cyprus's banks were ordered to remain closed until Thursday, and even then will operate under as-yet-undisclosed capital controls imposed to prevent depositors from emptying the vaults.
The Central Bank governor said the controls would be "loose" and would apply to all banks in the country. The restrictions would be "temporary" but he would not say what form they would take or how long they would last. Earlier, the finance minister said they could be in place for weeks.
Cyprus had faced bankruptcy and potential ejection from the European single currency without a rescue deal with international lending bodies. Now that the deal has been struck, it faces job losses and economic contraction.
Reuters journalists estimated up to 3,000 high school students protested outside parliament, the first major expression of popular anger after Cyprus agreed the 10 billion euro ($13 billion) bailout with the European Union.
"They've just gotten rid of all our dreams, everything we've worked for, everything we've achieved up until now, what our parents have achieved," said a student who gave his name as Thomas.
Outside the central bank, about 200 employees of the country's biggest commercial bank, the Bank of Cyprus, demanded the resignation of the central bank governor, Panicos Demetriades, chanting "Hands off Cyprus" and "Disgrace".
"We are scared. We were also so proud of the Bank of Cyprus. We worked with a lot of love, not just for the money," said a Bank of Cyprus worker who gave her name as Anthoulla.
Under the bailout, the second largest bank, Cyprus Popular Bank, is to be shut down and its accounts of under 100,000 euros combined with those of the Bank of Cyprus. Accounts of more than 100,000 euros at both banks will be frozen, with depositors, many of them rich foreigners, likely to lose much of their investments.
Dinos Christofides, an accountant and banker, told Reuters he had been named administrator to run the Bank of Cyprus: "It means that from now until further notice I will be running the bank. It could be short term ... or it could be longer."
Bank of Cyprus chairman Andreas Artemis offered to resign on Tuesday, a source at the bank said. His fate was not clear after the bank declined to accept his resignation.
After returning from last-ditch negotiations in Brussels, Cypriot President Nicos Anastasiades said late on Monday that the rescue plan agreed was "painful" but essential.
European leaders said the deal averted a chaotic national bankruptcy that might have forced Cyprus from the euro.
A Cyprus exit from the euro would be "disastrous, politically and economically" and was not to be contemplated, Finance Minister Michael Sarris said.
By protecting state guaranteed deposits of up to 100,000 euros, the bailout reversed a previous deal that would have imposed a levy on small depositors as well as big ones, which had infuriated Cypriots and was vetoed by parliament. Sarris said big depositors could face loses of around 40 percent.
Many Cypriots say they do not feel reassured by the new deal, however, and are expected to besiege banks as soon as they reopen after a shutdown that began over a week ago.
Reversing a previous decision to start reopening at least some banks on Tuesday, the central bank said late on Monday that all banks would now stay shut for two more days to ensure the "smooth functioning of the whole banking system".
Little is known about the restrictions on transactions that Anastasiades said the central bank would impose, but he told Cypriots: "I want to assure you that this will be a very temporary measure that will gradually be relaxed."
Such controls are at odds with the European Union's ideals of a common market but the government is anxious to prevent any panic that would cause even more disruption to the economy.
The central bank has imposed a 100-euro daily limit on withdrawals from cash machines at the two biggest banks.
Without an agreement by the end of Monday, Cyprus risked becoming the first country to be pushed out of the European single currency - a fate Germany and other northern creditors seemed willing to inflict.
The closure of the banks for more than a week has hurt business. Andreas Hadjiadamou, president of the Cyprus Supermarkets Association, said: "It's had a huge effect on the market. Consumers' psychology has hit the floor."
"If they (the banks) don't open on Thursday we could see supply problems as well as delays in salary payments."
Maria Benaki, who runs a family silverware business on Nicosia's biggest shopping street, said she hasn't had a customer in days.
"The situation is dire. I don't understand why we bother coming into work at all to be honest," she said. "What will happen at the end of the month when I need to pay my bills?"