Cyprus: Bailout Deal Will Do More Harm than Good
Cypriots gather in front of the Laiki bank just before it opened at noon today. Banks in Cyprus were closed for 12 days due to the country’s banking crisis and re-opened today with strict capital controls, including limiting withdrawals to 300 euros per day. (Milos Bicanski/Getty Images)
March 28, 2013
| Economics
| Europe
As banks opened today in Cyprus after being shuttered for twelve days, it became quickly apparent that a crisis had been averted. Cyprus will not be forced to leave the eurozone, and Russia will not gain a larger toe-hold in the Mediterranean by coming to the country's rescue. But all is not well. The agreement reached to keep Cyprus afloat will prolong the EU-wide debt crisis and will likely destroy the country's offshore banking sector, plunging it into a Greek-style depression for years to come.
Banks in Cyprus opened today at noon local time (6 AM EDT) after having been closed since March 16. Strict capital controls are in place to prevent bank runs and the removal of cash from the country. Cypriot bank customers are allowed to withdraw 300 euros ($383) a day and cannot write checks. Travelers leaving Cyprus may only take 1,000 euros with them.
The Cypriot central bank will review all commercial transactions over 5,000 euros. People abroad with Cypriot bank accounts can only withdraw 5,000 euros per month.
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