Cyprus Banks Reopen, Bailout Negotiations Continue

Jeff Custer
March 28,2013

Banks across Cyprus reopened as scheduled Thursday, nearly two weeks after being shut down amid the country's brush with economic collapse. Meanwhile, the government continues to negotiate a bailout agreement with international creditors that will see large depositors lose a portion of their money.

Depositors formed long lines on the sidewalks and streets outside their banks long before the doors were unlocked at noon, local time - anxiously awaiting access to their accounts.

The banks were scheduled to stay open for just six hours, with customers only allowed to withdraw $383 a day.

Travelers leaving the Mediterranean island can take no more than $3,831 to other countries.

The restrictions are part of the deal negotiated with the nation's creditors, including the European Union. European Commission Spokesman Sebastian Brabant says the restrictions are needed to maintain financial stability:

"Cyprus is facing exceptionally difficult circumstances including a very real risk of uncontrollable capital flight," said Brabant. "Therefore, the Commission considers, having made a preliminary assessment of the Cypriot laws, that the conditions for restricting free movement of capital are met in Cyprus at this stage.

The Cypriot cabinet met Thursday at the Presidential Palace to discuss terms of the bailout agreement.

European financial markets were steady Thursday as the banks reopened. Economist Pier Carlo Padoan said the markets were no longer concerned about the situation in Cyprus:

"If we have to judge from what has been happening in the last few days, we take the message that markets are not particularly worried about Cyprus and that the positive fact that I alluded to previously, the fact that the overall systemic risk of the region had been going down, is not going to be changed by what is happening in Cyprus," said Padoan.

Security was tight Wednesday evening as armored trucks delivered thousands of euros to the Bank of Cyprus, while employees prepared to resume operations.

Cyprus banks have been closed since March 16 while the government negotiated a $13 billion bailout from European neighbors, the European Central Bank and International Monetary Fund. As part of the deal, Cyprus agreed to confiscate 40 percent or more from the biggest, uninsured accounts above $130,000 to help pay for the rescue.