Cyprus scrambles to stop run when banks reopen on Thursday
“Superhuman” efforts are being made to reopen banks in Cyprus on Thursday, the central bank governor said, as protests and uncertainty over the island’s top lender showed a huge bailout has not ended its troubles.
The comment, made by central bank governor Panicos Demetriades on Tuesday, came as hundreds of angry Bank of Cyprus workers demonstrated outside his office and thousands of students rallied against the EU-IMF rescue package.
Banks remained shut for an 11th day after markets reacted badly to comments by Eurogroup chief of finance ministers Jeroen Dijsselbloem, who suggested actions in Cyprus could act as a template for future bailouts.
The decision to remain closed, taken late Monday, left homes and businesses on the Mediterranean island scrambling for cash—and there were growing doubts about whether banks would even open their doors on Thursday, as promised.
Demetriades said the delay in reopening was to fully install capital controls to prevent depositors from draining their accounts, and also to strengthen number one lender the Bank of Cyprus.
“A superhuman effort is being made for the banks to open on Thursday,” he said.
President Nicos Anastasiades secured the €10 billion ($13 billion) bailout in Brussels early Monday, just hours before Cyprus faced bankruptcy and a possible exit from the euro.
Dijsselbloem’s comments Monday had led markets to speculate that the bailout was a model for other struggling members. He later released a statement on Twitter which said Cyprus was a “specific” case.
Most European stocks and the euro rallied on Tuesday. That recovery continued in early trading in Asia Wednesday.
But many Cypriots now fear for their jobs and a future darkened by austerity.
The sense of uncertainty deepened Tuesday when Bank of Cyprus chairman Andreas Artemis suddenly tendered his resignation over concerns about the impact of the bailout. The board of directors refused to accept it.
Hundreds of bank staff, worried for their jobs, flooded into its headquarters in Nicosia on news that an administrator had been appointed to oversee its restructuring as part of the bailout.
Chief executive Yiannis Kypri tried to reassure them but they then marched to the central bank building to call for the resignation of governor Demetriades.
“We don’t know if the bank will be closed or if we will have work… we have to demonstrate to show that we don’t want others to decide for our lives,” said Andreas Costa, a 53-year-old BoC employee.
‘They want to take all our money from us’
Earlier, around 2,000 students worried about the effect the bailout would have on savings intended for their studies marched on the presidential palace, responding to an appeal posted on Facebook.
Protesters denounced Eurogroup officials, and in particular the Germans, for the harsh conditions imposed on the island.
Finance Minister Michalis Sarris meanwhile warned that the “haircut” to be imposed on deposits of over €100,000 ($129,000) at the Bank of Cyprus could be greater than expected, at 40 percent.
The agreement struck early Monday will see the second largest lender Laiki wound up, with some parts of it merged into Bank of Cyprus, dealing a major blow to jobs and the availability of credit to consumers and small businesses.
Fitch ratings agency downgraded the two banks to default category and placed the island’s third biggest lender, Hellenic Bank, on negative watch.
The Cyprus bailout has stirred up fears among other struggling economies following Dijsselbloem’s comments. Stocks in Greece and Spain, two other indebted eurozone economies, both fell sharply on Tuesday.
Greek Finance Minister Yannis Stournaras insisted however that the Cyprus deal only applied there.
Many on the island deeply resent the unprecedented demand by eurozone creditors for bank depositors to foot so much of the bill for the bailout.
Wealthy eurozone governments had refused to bail out Cyprus unless it agreed to put an end to what they regarded as a “casino” financial sector dependent on hot money from countries like Russia.
Germany’s Chancellor Angela Merkel has become a particular target for demonstrators’ anger in Cyprus, as she was in Greece last year.
Finnish Prime Minister Jyrki Katainen called for eurozone taxpayers to be spared from bailing out troubled banks in the future, insisting that shareholders and investors should foot the bill instead.
French President Francois Hollande said the safety of bank deposits up to €100,000, called into question by an earlier Cyprus bailout plan which was rejected by parliament earlier this month, should be sacrosanct in the European Union.
“The guarantee of deposits should be an absolute, irrevocable principle,” he said.