November 18, 2017

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arm, issued a statement Thursday morning that the Cyprus controls were legal — though urging that they be rescinded as soon as possible.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

Slow Pace of Greek Talks Fuels Anxieties

But negotiations were proceeding slowly, and a statement released by the government cast doubt on whether the parties would be able to agree on a new leader before Tuesday.

The statement, in its entirety, read: “There was a positive approach in talks between Prime Minister George Papandreou and the leader of the main opposition, Antonis Samaras, regarding who should be the new prime minister.”

Mr. Papandreou’s office said that a cabinet meeting was scheduled for noon Tuesday. It remained unclear when a new prime minister and government would be announced.

The wrangling has fueled fresh fears about Greece’s acceptance of a debt-relief deal struck on Oct. 26 that is seen as crucial to containing the crisis and insulating Italy, a much larger economy whose political leaders have also struggled to cut budgets and deal with heavy debt.

Deepening doubts on that score, finance ministers from the euro zone on Monday demanded a letter from the two leading Greek political parties confirming their commitment to the loan deal before releasing the $11 billion Athens says it needs to avert default on its debts next month.

Reflecting the confusion in Rome and Athens, yields on Italian bonds — the price Italy must pay to borrow money on international markets — rose on Monday to more than 6.6 percent, the highest since the introduction of the euro more than a decade ago, news reports said.

The debt deal requires that the Greek Parliament pass a new round of austerity measures, including layoffs of government workers, in a climate of growing social unrest. It also calls for permanent foreign monitoring to ensure that Greece keeps its pledges of structural changes to its economy, a requirement that many Greeks see as an affront to national sovereignty.

The new unity government, in which the major Greek parties would share power, is widely expected to be led by a nonpolitician and to govern for several months, long enough to implement the debt deal and pass a budget for 2012.

In a statement early Monday, the Greek Finance Ministry said that delegations from Mr. Papandreou’s Socialist Party and Mr. Samaras’s New Democracy Party regarded Feb. 19 as “the most appropriate date for elections.”

Mr. Samaras is not expected to play a role in the unity government, but would be a candidate for prime minister in the general election.

In many ways, a new interim government buys time for European leaders to put together a stronger bailout mechanism that would protect larger economies from the risk of default, chief among them Italy.

“The decision is very positive, because it will appease the markets and because it shows that Greek authorities are doing what foreign leaders want them to do — to get on with implementing the conditions for the E.U. debt deal,” said Athanassios Papandropoulos, an economist and a commentator for the conservative Greek newspaper Estia.

Still, Mr. Papandropoulos said he saw little chance that a unity government could get Greece on the road to recovery. “It will last three months,” he said. “then we’ll have elections, and then we’ll have the same problems all over again.”

One person being mentioned as a possible leader of the new unity government is Lucas Papademos, a former governor of the Bank of Greece. Mr. Papademos is a former vice president of the European Central Bank and has been teaching at Harvard since his retirement in 2010.

 The Greek debt crisis flared during Mr. Papademos’s last year at the European Central Bank, and he became known for supporting a hard-line policy that Greece should never default.

 Now, if he were to head the new government, Mr. Papademos would have to support the 50 percent debt reduction proposal that is the heart of the deal.

Landon Thomas Jr. contributed reporting.

Article source: http://www.nytimes.com/2011/11/08/world/europe/greek-leaders-reach-deal-to-form-a-new-government.html?partner=rss&emc=rss

Italian Debt Adds to Fears in Euro Zone

Finance ministers in the euro zone had previously scheduled two days of talks to begin on Monday afternoon in Brussels, with an emphasis on how to resolve Greece’s troubles. Over the weekend, a meeting of more senior officials was set for Monday morning.

A spokesman for Herman Van Rompuy, president of the European Council, denied that senior officials would discuss the state of Italy’s finances, which many investors consider increasingly precarious. But another official, who requested anonymity because he was not authorized to speak publicly, said Italy would probably be on the agenda.

For Italy, the cost of financing its debt rose at the end of the week, though nowhere near the levels faced by Greece. The spread between the yield on the Italian 10-year bond and the German equivalent widened on Friday to 2.36 percentage points, the most since the introduction of the euro.

Italy’s cost of borrowing for 10 years is now about 5.27 percent. Meanwhile, its blue-chip stock market index, the FTSE MIB, fell 3.5 percent.

Investors were unnerved in part by evidence of a growing divide between the Italian prime minister, Silvio Berlusconi, and the finance minister, Giulio Tremonti, who has been praised for his handling of the economy during the financial crisis and for maintaining control of the budget deficit.

The euro zone has been shaken by the fiscal troubles of Greece, Portugal and Ireland, though their economies are relatively small. The Italian economy is more than twice the size of the combined economies of those three countries. If investors were to drive Italy’s borrowing costs to unsustainable levels, it could imperil the entire European monetary union.

Even without Italy, European officials have a big task in the coming days. They have reached an impasse of sorts on whether to include the private sector in a second Greek bailout, which is considered essential to controlling the crisis that has so far been limited to the smaller economies on the Continent.

Some officials now believe that any bailout plan involving a substantial but voluntary contribution from private investors in Greek debt would be declared a selective default by the bond rating agencies Moody’s, Standard Poor’s and Fitch. The officials’ objectives of achieving a private sector contribution that is voluntary and substantial — but which is not judged a selective default — may not be possible.

If voluntary steps would cause such an event, these officials say, then more radical options may as well be considered, including requiring banks and other private investors to take part.

Speaking on Sunday at a conference in Aix-en-Provence, France, the president of the European Central Bank, Jean-Claude Trichet, said Europe was at the “epicenter” of a debt crisis that had to be of concern to the entire developed world. He urged euro zone officials to do the “maximum” in terms of governance reforms, Bloomberg News reported. He has also been adamant about keeping debt reduction by private investors out of any bailout plan.

The special session of top European officials is to start about 8:30 a.m. Monday, when a scheduled meeting between Mr. Van Rompuy and the president of the European Commission, José Manuel Barroso, will be expanded to include Mr. Trichet; the European commissioner for economic and monetary affairs, Olli Rehn; and Jean-Claude Juncker, the finance minister for Luxembourg, who presides over meetings of the so-called Eurogroup of finance ministers from the 17 countries that use the euro as their official currency.

Vittorio Grilli, the director general of the Italian treasury, is also scheduled to attend. But Dirk De Backer, a spokesman for Mr. Van Rompuy, said Mr. Grilli would be there in his capacity as head of the euro zone’s Economic and Financial Committee and not to discuss his country’s economy.

Liz Alderman contributed reporting from Paris.

Article source: http://www.nytimes.com/2011/07/11/business/global/italy-becoming-a-bigger-priority-for-euro-zone.html?partner=rss&emc=rss