Banks Open, Stock Exchange Remains Closed in Cyprus

Today, Cypriot banks will open their doors to customers for the first time in two weeks. Anticipating a major run on deposits, the Finance Ministry has imposed strict capital controls to stop depositers from cleaning out their vaults. These include a 300 Euro per day withdrawal cap, a ban on check cashing, and an injunction on the foreign transfer of funds. Economists rightfully predicted that citizens would be flocking to the banks today to salvage whatever they could from their newly-thawed accounts.

Despite the vaguely comforting sign that banks are unshuttering today, Cyrpus’ Stock Exchange extended its shutdown through Easter. The bourse cited the choking of currency transfers for its delay, claiming that the EU’s interbank system would not allow trading to occur until early next week.

Such oppressive controls are worrisome because, once imposed, they can be difficult to remove. Curbs in Iceland remain in place five years after their financial crisis, and the Argentine corralito held for a year. The latter measure actually backfired on the government, as even more people stormed the banks in an attempt to gain access to their funds. Some have expressed concern that the controls in place in Cyprus today could do more harm than good, and eventually lead to their exit from the single-currency system of the EU.

Cypriot state officials have put 180 British guards in place at various bank locations on the island to keep the peace should a spark light this tinderbox today.


1 Comment

  1. April 3, 2013  10:21 pm by agauzzaAndrew Reply

    Why are we all not worried? This is a litmus test for future US politicians to RAID our piggy banks. Actually we have really already tested this with the "failure" of MF Global. We stole all of the poor cattle farmers money, now didn't we?

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