July 15, 2019

Long Lines as Banks Reopen in Cyprus After Freeze

“We were in the Stone Age, and now we’re entering the 19th century,” he said in this village near the capital, Nicosia, after visiting his branch of the Bank of Cyprus, which opened Thursday for the first time since March 15. He cursed the strict new controls that for at least the next week will give him access to only a tiny portion of his money and stop him from cashing checks freely or using his bank to pay suppliers who use different ones.

Across Cyprus, fears that the reopening could lead to a chaotic bank run gave way Thursday to conflicting emotions: relief that bank doors were at least open again, but anger over the new rules, which allow deposits but tightly ration withdrawals.

The restrictions are meant to keep customers from draining their accounts in the wake of the bailout deal announced Monday morning in Brussels. European leaders hailed the deal as saving Cyprus’s teetering banks — and the country as a whole — from collapse.

But the prevailing view in Cyprus is that those leaders have mainly sought to halt a potential financial contagion from spreading by allowing it to devastate Cyprus and its bank depositors.

For Mr. Sofroniou, the bailout terms show that the European Union is driven by the same merciless forces now playing out in the long concrete-and-aluminum sheds of his family farm. “The weakest pigs in the pen don’t eat,” he said. “The strong ones eat everything. This is the law of nature.”

In a daily struggle for meager rations, he said, “The weak ones will be eaten.”

Mr. Sofroniou has a sheaf of checks from customers who have bought pigs from him over the past two weeks. But they were nearly all drawn on accounts at cooperative banks and are not yet honored by the Bank of Cyprus.

Not since the introduction of the euro in January 1999 has a European country blocked bank depositors from having full access to their own cash. Under European Union treaties, such restrictions are normally forbidden. But the European Commission, the union’s administrative arm, issued a statement Thursday morning that the Cyprus controls were legal — though urging that they be rescinded as soon as possible. Originally, the controls were to be in place for one week. But on Thursday, the Cypriot foreign minister, Ioannis Kasoulides, said that restrictions on financial transactions would not be lifted for a month.

Earlier, as banks were preparing to open at noon, local radio stations and Twitter messages pleaded for patience, urging people to show patriotic discipline and not to stampede cashier windows. To make sure that there was enough cash on hand, the European Central Bank flew in a container on Wednesday with about 1.5 billion euros, or $1.9 billion, to the Larnaca airport near Nicosia. The container was then taken under police escort to the Cypriot central bank.

Bank employees started preparing early. Many were given three pages of allowed transactions to which to refer when customers demanded their money. Bags of coins were piled high on a desk at Laiki Bank in central Nicosia, while a manager in a dark business suit stood at the front door waving away a retiree who was trying to enter early.

Some of those in bank lines on Thursday conceded understanding for the rigid restrictions, imposed by Cypriot officials in consultation with the European Central Bank, the European Commission and the International Monetary Fund — the so-called troika of lenders that now largely dictates the fate of Cyprus. The lenders promised the country 10 billion euros, or $12.8 billion, as long as it shrinks a banking sector bloated by money from wealthy Russians and other foreigners seeking to avoid taxes back home.

“They need to control the money,” said Dimitris Dimitriou, the owner of an optical business. He stood in line for 45 minutes in Nicosia to enter a branch of Laiki Bank, which is set to be dismantled as part of the bailout. “Financially it’s been a disaster, for me and for the entire population.”

As security guards let a slow trickle of customers through a revolving door, a small crowd pressed Mr. Dimitriou toward the bank’s entrance, a scene probably repeated in hundreds of spots across the country. But with the police on high alert and extra private security guards called in to prevent disorder, no outbreaks of violence were reported.

Few thought that the banks’ reopening was a return to normality — or even a dependable sign that a bank run was out of the question once the currency controls lift. “People here have not recovered from the shock that has happened to us,” Mr. Dimitriou said. When they do, he said, “a lot more people will want to get their money out of the banks.”

The controls effectively create two classes of the same money, analysts said: the constrained euros in Cyprus, and the fully fungible ones elsewhere.

In Akaki, the village president, Giannakis Chatziyannis, said he feared that “this is just the start of our troubles.” The economic crisis, he said, will get far worse as jobs evaporate — including those at a local Laiki branch set to be shut down. He was supposed to pay his own employees at the end of March but told them they would have to wait.

“Everyone knows that the next 10 years are going to be very bleak,” he said. “We are in a downward spiral.”

Anger at the European Union and its most powerful member, Germany, has reached a boiling point in Cyprus. Even in Akaki, which seems distant from the political passions of the capital, Chancellor Angela Merkel of Germany has become a hated figure. Writing by the roadside entrance to the village referred to her with a vulgarism and said, “Cyprus above all.”

“We are what you call collateral damage,” said Chrysanthos Chrysanthou, a goat and chicken farmer. He blamed the German-led push to reshape Cyprus’s banking industry for leaving his animals on “starvation rations.”

He, too, went to the bank on Thursday and withdrew the limit of 300 euros, far less than he needed to keep his animals fed.

Germany and other lenders “say they want to penalize bankers but are just hurting everyone,” he said. “We are not all bankers. A lot of people here do real work.”

When a supplier of animal feed called to demand cash, he said he could pay only by check. The supplier, who uses a different bank, said no. Throwing down the phone in fury, Mr. Chrysanthou said he had returned to Cyprus in 1994 after years in South Africa but was now thinking of leaving. “I left South Africa after I was robbed by thieves,” he said. “Now I’m being robbed again here.”

Andrew Higgins reported from Akaki, and Liz Alderman from Nicosia, Cyprus. Dimitrias Bounias contributed reporting from Akaki, and Andreas Ris from Nicosia.

This article has been revised to reflect the following correction:

Correction: March 28, 2013

An earlier version of this article referred incorrectly to capital controls in Europe. They have not been applied since the introduction of the euro; it is not the case that they have never been applied.

This article has been revised to reflect the following correction:

Correction: March 28, 2013

An earlier version of this article misstated the surname of the president of the village of Akaki. He is Giannakis Chatziyannis, not Chatzyiannis.

Article source: http://www.nytimes.com/2013/03/29/business/global/cyprus-banks.html?partner=rss&emc=rss