Dimitra Harilaou and her husband led a comfortable life in Nicosia. Her husband’s pension – he used to run a state prison – and the earnings from her electronic equipment store allowed the couple to put some money away in the bank for a rainy day. But after financial crisis hit the island a week ago today their savings, along with those of thousands of other ordinary Cypriots, are now under threat.
Last week, the Cypriot government caused panic when it agreed a deal with 17 eurozone finance ministers in Brussels to impose a tax of up to 9.9 per cent on deposits to qualify for the €10bn (£8.5bn) bailout designed to save the island from bankruptcy – sending people rushing to cash machines to try to withdraw their money. Though those with less that €20,000 in the bank were later exempted, the deal on the table could still see those with between €20,000 and €100,000 lose 6.75 per cent of their savings, and those with over €100,000 lose 9.9 per cent.
To prevent a run on the country’s banks, they have been shut since Monday, and are not due to reopen until Tuesday next week at the earliest.
Ms Harilaou, 59, says she plans go to the bank on Tuesday and withdraw as much cash as possible – though she’s well aware there will be a cap on how much of her own money she can take.
“It will be chaos, people will be queuing to get in the banks so we’ll have to get up very early in the morning,” she said. “I’m scared for where we’re all headed, as so many people will be mad not to be able to access their funds – it’ll be a bloody Tuesday.”
Eurozone leaders, led by Germany, have offered Cyprus €10 bn on the condition it raises €5.8bn of its own.
The tax on savings was just one of the potential measures being debated in the Cypriot parliament yesterday, in a bid to bring Cyprus back from the brink of a financial meltdown and prevent it from being forced to leave the euro.
Despite the current crisis, Ms Harilaou says she believes the country needs to stay in the euro. “Going back to the Cypriot pound will be a return to Stone Age,” she warns.
She blames the country’s previous communist government for the mess, and lambasts all the so-called ‘Cypriot patriots’ who have said they are willing to give their savings to rescue the state.
Georgia, 23, works in a hotel. She says she first wants the situation to stabilise before taking any decisions towards her money. Georgia has managed to save €4,000 in the bank and does not believe she will lose it, though she says her family have started eating fewer meals because her parents – who she lives with – are uncertain about what the future could bring.
“We’re not panicking yet, but it’s better to be safe than sorry,” she explains. However, while banks across the island remained shuttered, many stores reported a serious drop in their takings.
Nikos’ supermarket in the heart of Nicosia, right opposite the city’s main bus station, has been operating for nearly 50 years – it had witnessed the Turkish invasion in 1974 – and yet nothing, says Niko, compares to the current financial crisis.
Though his shelves and refrigerators were still packed with foods and drinks for the moment, he is well aware that the cash shortage in Cyprus could soon lead to food shortages soon.
While savers can still remove cash from ATM machines, capital restrictions means Cypriots cannot withdraw more than €260 a day.
Nikos showed The Independent invoices from his suppliers, all of which read “Cash only” after cheque payments were stopped by authorities. With the limited cash available, he says he now must prioritise his orders and mainly buys staple food. “What’s the point of having nail varnish, when you don’t have milk?” he explains.
Nikos is one of the many Cypriots who is indebted to his bank, and says he believes a collapse won’t affect him. He also remains very weary of European help. “Protect me my friends because I know who my enemies are,” he said.
The demands from the eurozone – led by Germany – have led to a swell of resentment. A survey conducted by Prime Consulting found that six out of 10 Cypriots now support an exit from the Eurozone and strengthening of relations with Russia.
Despina, a saleswoman who joined protesters outside the Parliament in Nicosia for a second day yesterday said she would “rather starve than submit to the diktats of Germany.”
Her anger for the Cypriot government was equally boundless. “All politicians are crooks, what they’re doing is suicidal.”
Despina’s friend, Matina, has worked for 22 years at Laiki bank – which, if no ‘Plan B’ for raising the €5.8bn can be found by Monday, will be one of those affected by the Eurozone leaders’ threat to pull funding from the European Central Bank to Cypriot banks. The Bank of Cyprus and Laiki are reliant on this ECB lifeline, raising fears that they will collapse next week if no deal is reached.
Though the Cypriot Central Bank has denied that Laiki Bank is about to be shut altogether, Matina believes she will probably lose her job in the scramble to restructure the country’s banks – another measure intended to help avoid bankruptcy.
“Germany has turned Cyprus into a laboratory where they’re testing what they didn’t achieve in Greece,” she said. “But what this will only lead to, is the breakdown of Europe – no country joined this union to be a slave.”
Explainer: The deal on the table
The proposals currently under debate are aimed at both raising the money required by the troika and preventing financial turmoil.
The government plans to restructure Cyprus Popular Bank, known as Laiki. It is the nation’s second-largest lender, but racked up huge losses because of investments in Greece. The proposal is to split the bank into a “good bank” of modest deposits and a “bad bank” of deposits over €100,000 (£85,000). The “bad bank” account holders could lose up to 30 per cent of their money.
Creation of a “solidarity fund” is the second plank of Cyprus’s strategy to raise the cash. This would involve bundling together nationalised pensions and other state assets, including assets that the church has offered up to save the island from a default.
The Finance Minister also last night confirmed the country would again look at imposing a levy on anyone with over €100,000 in the bank. This was part of the plan agreed in Brussels last weekend, but there was fierce domestic opposition. EU officials have little hope of raising the money needed without this measure.
The Cypriots are also looking to stop money flooding out of the country when the banks reopen on Tuesday.