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Bank restrictions to be lifted (updated)

Update 25 October – Presenting the 2014 budget to parliament on Monday, Finance Minister Harris Georgiades said that restrictions on bank transactions that were imposed earlier this year will be gradually lifted by spring.

CYPRUS Finance Minister Harris Georgiades presented the 2014 budget to Parliament yesterday, warning that it will be the most difficult year for the island’s economy.

He stressed the need for proper management of the €10 billion loan agreement with the Troika to avert a new Memorandum.

The Minister explained to MPs that a key feature of the budget is a reduction in public spending and that this was not an option but something that was imposed by the economic reality and many of the proposed savings should have been made a long time ago.

Mr Georgiades pointed out that the €10 billion loan agreement under the Memorandum is the government’s only source of funding and that it cannot afford expenditure increases at a time when the island excluded from borrowing on the international money markets.

He also said that there is a balance in the state’s coffers from the €4.7 billion that has been pumped in so far, which lead him to conclude that the next tranche will probably be very small.

The Minister was also reported as saying that restrictions on bank transactions, imposed after the Eurogroup’s decision on Cyprus in March, will be gradually lifted by spring 2014, with the exception of the transfer of money to banks abroad.

Referring to the banking restrictions during an interview with Bloomberg in September, President Anastasiades was reported as saying that “The controls are being lifted. They will end within a timeframe of January 2014.”

This latest announcement by the Finance Minister will not be welcomed by those who have managed to sell their properties on the island but who have been unable to repatriate the total proceeds from their sale to their home countries.

Update 25 October (Cyprus Mail)

CYPRUS has scrapped more financial restrictions imposed after its international bailout in March, taking a further step towards undoing currency controls designed to prevent a run on its banks.

The finance ministry said it had scrapped a requirement for supporting documentation on domestic business transactions exceeding €300,000, though a bank could still seek such information if it deemed it was necessary.

The ministry also raised the threshold for businesses making transactions abroad to €1 million for each deal from €500,000.

Cyprus’s finance minister had told lawmakers on Monday he anticipated all currency controls related to domestic transactions would be lifted by spring 2014.

Friday’s decree was the 22nd since the island became the first euro zone member to enforce capital controls at the end of March. It is applicable until November 24.

Under the strict financial controls, travellers abroad could initially not shift more than 1,000 euros out of the country. This has now been raised to €3,000.

There have also been relaxations on the amount of money individuals could transfer from one bank account to another for payments, with the limit now set at €15,000 without the need for approval.

In return for €10 billion in aid from international lenders, the island in March agreed to wind down one major bank – Laiki – and impose losses on depositors in a second under-capitalised bank, Bank of Cyprus.

Other subsequent restrictions such as a €300 daily withdrawal limit for individuals, a ban on the cashing of cheques, a ban on breaking fixed-time deposits and the opening of an account at another bank remain in place.

European Central Bank data on Friday showed cash withdrawals from the Cypriot banking system had slowed in September.

Readers' comments

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  • Clive of Payia says:

    Nigel.

    It’s the World Bank that are getting sniffy about this restriction and may, repeat may, instruct the troika to lift it.

  • @Clive of Payia – by the time it comes before the European Court – the embargo will have been lifted.

    There are wider implications of the delay on business who get goods and services from overseas – the delay will surely have a knock-on effect on the island’s economy in general.

  • Clive of Payia says:

    But still we will not be able to take our money out of Cyprus. Definitely feel a lawyer coming on to discover that it is illegal – most of the EU is!

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