Cyprus readies capital controls to avert bank run

Tue Mar 26, 2013 6:50pm EDT
 
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By Michele Kambas and Costas Pitas

NICOSIA (Reuters) - Cyprus is expected to complete capital control measures on Wednesday to prevent a run on the banks by depositors anxious about their savings after the country agreed a painful rescue package with international lenders.

Cypriots have taken to the streets of Nicosia in their thousands to protest at a bailout deal that they fear will push their country into an economic slump and cost many their jobs. European leaders said the deal averted a chaotic national bankruptcy that might have forced Cyprus out of the euro.

With banks due to reopen on Thursday, Finance Minister Michael Sarris said he expected the control measures to be ready by noon (5 a.m. EST) on Wednesday: "I think they will be within the realms of reason," he said, without going into details.

"Banks will open on Thursday ... 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," Sarris said in a Cyprus television interview.

The central bank governor said earlier that "loose" controls would apply temporarily to all banks. Earlier, the finance minister said they could be in place for weeks. Banks have been shut since final bailout talks got under way in mid-March.

Up to 3,000 high school students protested at parliament, the first major expression of popular anger after Cyprus agreed the 10-billion euro ($13-billion) rescue with the European Union, International Monetary Fund and European Central Bank.

"They've just got rid of all our dreams, everything we've worked for, everything we've achieved up until now, what our parents have achieved," said one student, named Thomas.

Outside the central bank, about 200 employees of the country's biggest commercial lender, the Bank of Cyprus, demanded the resignation of the central bank governor, Panicos Demetriades, chanting "Hands off Cyprus" and "Disgrace".   Continued...

 
Students take part in an anti-Troika protest outside the Presidencial palace in Nicosia March 26, 2013. REUTERS/Yannis Behrakis