As new President Nicos Anastasiades hesitated over an EU bailout that has wrecked Cypruss offshore financial haven status,money was oozing out of his countrys closed banks.
In banknotes at cash machines and exceptional transfers for humanitarian supplies,large amounts of euros fled the east Mediterranean island before and after Cypriot lawmakers stunned Europe by rejecting a levy on all bank deposits.
EU negotiators knew something was wrong when the Central Bank of Cyprus requested more banknotes from the European Central Bank than the withdrawals it was reporting to Frankfurt implied were needed,an EU source familiar with the process said. The amount the Cypriots mentioned… on a daily basis was much less than it was in reality, the source said.
Confusion over just how much money was pulled out of banks is illustrative of the confusion surrounding the negotiations as a whole. Representing just 0.2 per cent of the euro zone economy,Cyprus nevertheless threatened to reignite the blocs debt crisis. Cyprus problems began in Greece it is heavily exposed to the euro zones first bailout casualty.
No one knows exactly how much money has left Cyprus banks,or where it has gone. The two banks at the centre of the crisis Cyprus Popular Bank,also known as Laiki,and Bank of Cyprus have units in London which remained open throughout the week and placed no limits on withdrawals. Bank of Cyprus also owns 80 per cent of Russias Uniastrum Bank,which put no restrictions on withdrawals in Russia. Russians were among Cypriot banks largest depositors.
While ordinary Cypriots queued at ATM machines to withdraw a few hundred euros as credit card transactions stopped,other depositors used an array of techniques to access their money.
Companies that had to meet margin calls to avoid defaulting on deals were granted funds. Transfers for trade in humanitarian products,medicines and jet fuel were allowed.
Chris Pavlou,who was vice chairman of Laiki until Friday,said while some money was withdrawn over a period of several days it was in the order of millions of euros,not billions.
Big depositors,including wealthy Russians and Britons,whom the Cypriot president had sought to shield from a levy of any more than 10 per cent on their holdings,will end up being far more severely burned if their money is still there.
Head of Cyprus’s biggest bank quits
The chairman of Cypruss biggest bank,the Bank of Cyprus,resigned abruptly on Tuesday. Antreas Artemis complained that authorities rode roughshod over him and his board by moving unilaterally to sell off units of the bank in Greece and planning to hit big depositors to pay for losses.