In a speech to civil servants in the capital of Nicosia on Friday, Anastasiades reiterated his commitment to remain in the EU, despite his government’s bitterness over what they feel is an imposed brutal deal to save their state.
“We have no intention of leaving the euro. In no way will we experiment with the future of our country,” the president said.
Cyprus was near to bankruptcy when it went to the EU, cap in hand, to ask for a bail out. The sun-soaked Mediterranean country lost billions to the Greeks when their economy imploded last year.
The EU agreed to a bail-out package, but only with strict terms. Cyprus was told in order to receive $13 billion, they must come up with $7 billion on their own for a combined total of a $20 billion rescue plan.
The banking system in Cyprus is bloated, it has nearly 68 billion euros ($88.6 billion) in deposits but that is six to eight times greater than the country’s gross domestic product. The country is a tax-haven to wealthy Russians, Europeans and Arabs.
Unable to raise the money the EU demanded, Cyprus turned inward to their bank depositors to collect $7 billion.
A plan to tax all bank accounts was scrapped by the Cypriot government in favour of taking money from account holders with balances greater than 100,000 euros or $131,000.
Late Friday, Reuters reported sources familiar with the “bail-in” plan say those with deposits over 100,000 euros in the Bank of Cyprus will receive shares in the bank worth 37.5 per cent of their account. However, they may lose the rest of their money.
These changes have effectively killed Cyprus’s international banking industry, the main economic driver of the nation of less than 1 million.
All of Cyprus’s banks shut for nearly two weeks while a deal was negotiated with the troika—the European Commission, the European Central Bank and the International Monetary Fund to rescue the country.
During that time, anti-German and anti-EU protests were a daily occurrence in Nicosia. When the banks finally opened on Thursday, chaos was expected but it did not happen.
Uzoma Prince waited in line Thursday to access his account at the Laiki, the bank that is being dissolved and folded into the Bank of Cyprus, and had no problems.
“This has been horrible,” Prince said of the situation in Cyprus. “Work is paralyzed, the economy is paralyzed.”
A series of rigid capital controls were put in place to stop people from draining their bank accounts. This prevented a bank run. The limits are expected to expire in a month.
Those controls include daily withdrawals restricted to 300 euros or about $390 in cash per day and businesses are able to carry out transactions of up to 5,000 euros or about $6,500 a day.
And, payments or transfers outside the country are only permitted up to 5,000 euros per month, per person.
In addition, all transactions over 200,000 euros or $260,000 will be examined.
Original Article
Source: thestar.com
Author: Tanya Talaga
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