A ROAD MAP to end capital controls for Cypriots was announced yesterday but no clear timeline was given as to when those restrictions would be completely lifted.
Under the terms outlined by the Finance Ministry it could take a year or two before the free movement of capital – outside and inside Cyprus – is allowed.
The eurozone’s first and only capital controls were introduced in March as the banking system threatened to collapse as the Troika imposed harsh bail-in terms to warrant a €10 billion Cyprus bailout.
“The restrictive measures were enforced to ensure the stability of the financial system and to safeguard public order,” said a Finance Ministry statement yesterday.
“Cypriot authorities are committed to removing the restrictive measures and ensuring free movement of capital, as soon as conditions allow,” it added.
It said the Troika had agreed on the key principles that restrictive measures shall remain in place only for as long as it is strictly necessary.
And restrictive measures will be “gradually removed” through careful and prudent steps, so as to safeguard financial stability.
Under the agreed road map the priority is to abolish restrictions on transactions within the Republic to be followed by allowing free cross border movement of capital.
But the relaxation of measures is linked to specific milestones such as recapitalising the banking sector and post-resolution Bank of Cyprus restructuring.
“These are instrumental in rebuilding depositors’ confidence in the Cypriot banking system and help economic recovery,” said the ministry.
“The restrictive measures linked to the particular relaxation stage will be removed in a step by step process,” it added.
For increased accessibility of funds and re-establishment of the free transferability of funds within the banking system, a co-op restructuring plan must be submitted to the European Commission and recapitalisation of Hellenic Bank completed.
Re-establishing free movement of capital within the Republic is conditional on completion of the co-op mergers – expected to begin in September and be completed in March 2014 – and tangible progress in the implementation of Bank of Cyprus’ restructuring plan.
And the abolition of all restrictive measures relating to the transfer of funds outside the Republic is linked to progress in the 2013-2016 adjustment programme combined with restitution of depositor confidence.
The Finance Ministry is very adept at issuing profound statements as if it always had everything mapped out and under its diligent control. Had it exercised its role in a more intelligent manner previously, perhaps it would not be in such dire straits as it is now.
The more time for the restrictive measures, the more time it will take for new money to come to Cyprus, it is a double edged sword, unless the government comes out with a decree forbidding itself from confiscating peoples money again, it will never see a penny from any investor, if the government relies on peoples memory ,then in this case the pain they inflicted on people will Stay for a very long time, investors have other countries to go to instead of Cyprus.
You buy a home and they don`t issue title deeds so you can`t own it. Now they keep your money to sure up the banks. Whatever next? It looks like house arrest of the innocent.
Basically this is a wish list of things with no time scales, to quote ‘ a year or two’, ‘ gradually removed’, ‘step by step process’, ‘as soon as conditions allow’. I would expect restrictions for the next 4-5 years as a minimum.