Cyprus’ banks, which have been closed all the week won’t open until next Tuesday, in order to prevent a bank run from Cypriot citizens.
The European Central Bank has decided on an ultimatum for Cyprus – it will stop emergency funding on Monday if a rescue plan hasn’t been established.
“Subsequently to the rejection of the Bill for the imposition of a fee on deposits by the House of Representatives, it is deemed necessary, on grounds of public interest in order to ensure financial stability, to declare the 21st and 22nd of March 2013 as a bank holiday,” a Cyprus government’s news release stated.
A Central Bank of Cyprus’ press release published the latest information today: “The Central Bank of Cyprus would like to inform the public that all banks will be closed on Monday, 25th March 2013 (Greek Independence Day).”
The condition for Cyprus to get help for the EU is to find 7bn euros. If it manages to achieve this, it will get an EU-IMF 10bn euros loan.
Regarding the latest developments in Cyprus, Mr. Christos Stylianides, Cyprus Government spokesman, said: “Given the decision by the House of Representatives which the President of the Republic fully respects, a collective effort continues in order to find solutions.
“The President of the Republic continues, as he has done from the first moment on March 15th following the decision of Eurogroup, and having in mind the opposing views of the political forces in Cyprus, to engage in intense efforts towards all available directions.”
He added that draft legislation is being prepared by the Law Office of the Republic and “will be presented before the Council of Ministers in a meeting which was called for today at 6pm.”
It is still quite unclear what changes the new plan could lead to and how the situation in Cyprus could evolve, but the troubles in Cyprus raise issues for the Eurozone and its citizens.
Jane Bryan, Research Associate at Cardiff Business School’s Welsh Economy Research Unit, said: “I think Cyprus was used as an experiment, because it is a small economy. It is ridiculous to impose tax through the banking system. It undermines confidence, bound to cause run on banks hence closure of all.
“Whatever happens in Cyprus will have ramifications across Europe,” she said.
Referring to the fourth UK budget, which was released yesterday, Chancellor George Osborne mentioned the Cyprus’ economy as an example of what happens when a country gets deeper in deficit.
Even though Cyprus and the UK are comparable to a certain extent, Cyprus’ debt to GDP ratio is broadly comparable to that of the UK. Referring to the difficulties Cyprus finds itself in George Osborne said that the UK economic situation “could be a lot worse.”
Crisis in Cyprus could also affect British citizens. Britons who have their money in Cyprus’ banks as well as the 60,000 British residents in Cyprus are facing concerns for their future.
This is visible on the internet sphere, on which British citizens react through posts on social networks as well as discussions on chat forums. British citizens worry about their savings and don’t know what decisions they should make.
Some of them ask publicly whether they should withdraw their money from Cyprus banks. “I’m a Brit living in the UK, with money invested in Bank of Cyprus. Are my savings threatened?”
On its Facebook page, the British High Commission Nicosia wrote: “Cyprus is implementing measures to protect its banking sector. The Government of Cyprus has announced an extended bank closure.
“ATMs, debit and credit cards can be used as normal however, while banks are closed, we advise taking sufficient euros to cover the duration of your stay, alongside appropriate security precautions against theft.”
More information about the situation and the new plan should come to light in the coming days.