Cyprus extends bank closures
NICOSIA, Cyprus — Cypriot businesses were under increasing strain to keep running on Tuesday after financial authorities stretched the country's bank closure into a second week in an attempt to stop depositors from rushing to drain their accounts.
Cyprus's Central Bank governor, Panicos Demetriades, said “superhuman efforts are being made” to open banks on Thursday.
“Temporary” restrictions will be imposed on financial transactions once the banks do open, he said, but he would not specify what they would be or how long they would be in place.
Finance Minister Michalis Sarris told The Associated Press the restrictions would help stem any mass deposit withdrawal and that they would be removed in a “relatively short period of time.”
All but two of the country's largest lenders had been due to reopen Tuesday, after being shut since March 16 to stop savers from withdrawing all their money while politicians figured out how to get an international bailout.
However, late Monday, authorities announced that the bank closures would be extended until Thursday, giving officials more time to initiate a major overhaul of the banking sector and devise capital controls to limit the amount of money that can be taken out of accounts.
Under the deal for a 10 billion euro ($12.9 billion) rescue clinched in Brussels early Monday, Cyprus agreed to slash its oversized banking sector and inflict hefty losses on large depositors in troubled banks. Sarris said authorities hope to limit job losses to a “small number.”
Cyprus needed to raise 5.8 billion euros before international lenders were willing to give it the 10 billion euros. Much of the 5.8 billion euros will be raised by forcing losses on accounts of more than 100,000 euros ($129,000), in the country's second-largest lender, Laiki, with the remainder coming from tax increases and privatizations.
Fitch credit rating agency warned Tuesday that it may downgrade Cyprus further into “junk” status amid banking failure concerns.