Cypriot fury as cash limit hurts business
As Cyprus cautiously cracked open the doors of its crisis-ridden banks on Thursday, pig farmer Stelios Sofroniou fumed at being able to withdraw only €300 ($369). That would buy just 1 tonne of feed, not the 30 tonnes he needed for his 15,000 pigs.
"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 had not been open 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 cheques 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 to conflicting emotions: relief that banks were at least open again, but anger over the new rules, which allow deposits but restrict withdrawals.
The rules are meant to stop customers from draining their accounts in the wake of the bailout deal announced on Monday in Brussels. European leaders hailed the deal as saving Cypriot banks - and the country as a whole - from collapse.
The prevailing view in Cyprus, however, is that those leaders have mainly sought to halt a potential contagion from spreading by allowing it to devastate Cyprus and its bank depositors.
For Sofroniou, the bailout terms show that the European Union is driven by the same merciless forces now playing out in 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 meagre rations, he said, "the weak ones will be eaten".
Sofroniou has a sheaf of cheques from customers who have bought pigs from him over the past two weeks, but they were nearly all drawn on accounts at co-operative banks and are not yet honoured by the Bank of Cyprus.
Not since the introduction of the euro in January 1999 has a European country blocked bank depositors from full access to their own cash.
Originally, the controls were to be in place for one week, but on Thursday Cypriot Foreign Minister Ioannis Kasoulides said that restrictions on transactions would not be lifted for a month.
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, village president Giannakis Chatziyannis said he feared that "this is just the start of our troubles".
The economic crisis, he said, would get far worse as jobs evaporated, including those at a local Laiki Bank 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 EU 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.
"We are what you call collateral damage," said Chrysanthos Chrysanthou, a goat and chicken farmer. He blamed the German-led push to reshape Cyprus' banking industry for leaving his animals on "starvation rations".
He, too, went to the bank on Thursday and withdrew the limit of €300 - far less than he needed to keep his animals fed.
Germany and other lenders "say they want to penalise bankers but are just hurting everyone", he said.
"We are not all bankers. A lot of people here do real work."
Frequently Asked Questions about this Article…
When banks in Cyprus cautiously reopened, customers were initially limited to withdrawing €300. The new controls also restricted cashing cheques freely and using one bank to pay suppliers who banked elsewhere.
Authorities introduced the controls to stop customers from draining accounts after a bailout deal announced in Brussels. Officials said the measures were meant to prevent a chaotic bank run and contain contagion that could threaten the banking system.
The limits hit small businesses and farmers hard: pig farmer Stelios Sofroniou could withdraw only €300 — enough for about 1 tonne of feed but far short of the 30 tonnes he needed — and many business owners could not cash cheques or pay suppliers whose accounts were at other banks, disrupting cash flow and payrolls.
The article reports that many cheques drawn on co-operative banks were not yet honoured by the Bank of Cyprus, so cross-bank cheque clearing and payments were disrupted while the restrictions remained in place.
The controls were originally to be in place for one week, but Cypriot Foreign Minister Ioannis Kasoulides said restrictions on transactions would not be lifted for a month.
Analysts described the situation as creating constrained euros inside Cyprus — subject to withdrawal and transaction limits — and fully fungible euros elsewhere. In other words, euros in Cypriot accounts were effectively less usable than euros outside the country.
Reactions were mixed: relief that banks reopened but widespread anger and fear. Many felt the bailout penalised ordinary depositors and businesses, with strong criticism focused on the EU and Germany; people warned of worsening economic pain and a bleak outlook.
The article highlighted risks of a downward spiral: potential job losses, bank branch closures (including Laiki Bank branches), disrupted payments and payrolls, and concerns that the crisis could devastate small businesses, farms and depositors over the coming years.
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