Limitations in financial transactions were announced
in Cyprus as banks are due to open today under huge security measures. Police
will be placed inside and outside banks. A transport plane transferred 5
billion Euros at the request of Cypriot banks from the European Central bank.
Fear has spread in the European Union member states
that the Cyprus solution will be a model for other states, and that depositors
will be considered as investors. This was announced by the new head of the Euro
group, from Holland, a sphere of influence under the German economic policy.
This may have the effects of transfer of capital from the southern states (Greece,
Italy, Spain, Portugal) to the north(Germany).
The daily cash outflow was set at 300 Euros per
person, no cashing of checks, while limitations are set for cash and credit
cards. Before the banking crisis was exposed, and while there was a limitations
of the amount of money that people could take out, there are reports that some managed to pull out hundreds of millions of Euros from
banks in London and Russia (Cypriot subsidiaries).
Many businesses operating in Cyprus face problems with
their daily operating activities; they are facing problems with paying
employees’ salaries, and many will end operations since their working capital
at the banks have virtually been confiscated.
As far as the haircut is concerned in the deposits of the problematic bank, 50% will be at Bank of Cyprus and 80% at Cyprus Popular Bank (former Laiki). Cypriot banks do not have liquidity, and is considered the number two nation in the European Union with the highest loans to its citizens.
