Cypriots panic as rumours swirl of more bank closures after €10bn bailout

Anger at a deal aimed at saving Cyprus from bankruptcy spilled into the streets today with thousands of students and finance workers demanding answers after the government said banks would remain shut for two more days and details of strict capital control measures emerged.

The central bank governor, Panicos Demetriades, stressed that “superhuman” efforts were being made to open Cypriot banks on Thursday as he sought to quell fears that the nation’s largest lender, the Bank of Cyprus, was about to be shut down. Today its chairman offered to quit and hundreds of its employees marched to the central bank building to protest against potential job losses. The chairman’s offer was later rejected by the bank’s board.

“We are scared,” one employee who gave her name as Anthoulla told Reuters news agency. “We were also so proud of the Bank of Cyprus. We worked with a lot of love, not just for the money.” About 3,000 secondary school students also protested outside parliament in Nicosia.

In the deal hammered out in Brussels on Sunday, people with over €100,000 in the two biggest banks will have their deposits frozen. Those with under €100,000 in the second biggest bank, Laiki, would have their money transferred into the Bank of Cyprus, with Laiki eventually shut.

These and other measures are expected to raise the €5.8bn that Cyprus needed to qualify for the €10bn bailout from the International Monetary Fund and European Central Bank (ECB).

Mr Demetriades tried to reassure people worried about the future of the largest bank, saying that the merger of the Laiki and the Bank of Cyprus “will give us a very strong bank”.

Earlier in the day Cypriot Finance Minister Michael Sarris confirmed that those with uninsured deposits above €100,000 in Laiki bank could lose 40 per cent of their savings. But how long it will be before they can access the remainder of their money remains unclear.

The banks were meant to reopen today, but the government announced late Monday that they would remain closed until tomorrow as they tried to work out what capital control measures were needed to prevent the exodus of cash from the country.

The BBC reported that the measures being considered included a weekly withdrawal limit at cash machines, a ban on cashing cheques, and the requirement that fixed-term deposits must be held until maturity.

Mr Demetriades said that controls on the movement of money would be “loose” and “temporary”, but it is the uncertainty that has people across the small Mediterranean island on edge.

“It seems like they are lying to us,” said Chris Protopapas, a 43-year-old computer repairman in Paphos who has been unable to find work for two years. “They said they are going to give it back in a few years but we need to survive in that time.”

Despite the anguish the deal has caused in Cyprus, Jeroen Dijsselbloem, the head of the grouping of eurozone finance ministers, said on Monday that the bailout for Cyprus could be a template for other struggling eurozone members. His remarks sent the euro to its lowest value against the dollar since November, and yesterday a member of the ECB’s executive committee, Benoit Coeure, dismissed the idea.

“The experience in Cyprus is not a model for the eurozone since the situation had reached a dimension that can’t be compared with any other country,” Mr Coeure told France’s Europe 1 radio “I think Mr Dijsselbloem was wrong to say what he said.”

Companies and individuals in Russia, meanwhile, are beginning to look at what recourse they might have to challenge the appropriation of a percentage of their deposits in Cyprus. Russian are believed to hold as much as 40 per cent of the money in Cypriot banks.