Cyprus Has A Future In The Euro, Insists President

500 Euro Note

Cyprus's president on Friday insisted his country has a future in the euro in a speech that also criticised his eurozone partners for forcing the Mediterranean island to be an "experiment".

"We have no intention of leaving the euro. In no way will we experiment with the future of our country," Nicos Anastasiades said.

Speaking the day after Cypriot banks reopened after a two-week closure to stave off financial collapse, the Conservative head of state said the threat of bankruptcy had been averted.

He also promised that restrictions on banking transactions – the first ever to be imposed on a eurozone member state – would be gradually lifted, but did not specify when.

Cash withdrawals from banks have been limited to €300 (£253) a day, while only €1,000 in cash can be taken out of the country, and there are restrictions on the use of credit cards abroad. Cypriot authorities loosened some restrictions on using cheques on Friday – but only to allow payments to government agencies of up to €5,000.

In another turnaround of capital controls placed on a euro member state, the finance ministry announced that debit and credit card transactions with the borders of the country could also be unlimited.

Cyprus's Central Bank has also imposed limits on the money that can be taken "beyond the control of the Cypriot authorities" – a reference to the northern part of the island under Turkish control.

After an initial estimate that the capital controls would be in place for a matter of days, the government then warned later in the week they could last for "about a month".

Anastasiades, who was elected in a landslide victory on a pro-bailout platform last month, has faced a backlash over the terms of the rescue. On Friday he accused eurozone leaders of making "unprecedented demands that forced Cyprus to become an experiment". He also criticised European banking authorities for allowing money to flood into Laiki, the island's second biggest bank, which had racked up billions of debt in bad loans and is now being wound up as part of the rescue deal.

"How serious were those authorities that permitted the financing of a bankrupt bank to the highest possible amount?" Anastasiades said.

Barely a month in power, the government has appointed an investigating committee of former supreme and international criminal court judges to probe possible criminal misconduct in the collapse of the Cypriot economy. With shocked Greek Cypriots now facing years of economic pain, there are mounting calls for punishment to be meted out to the politicians and bankers found to be responsible for the dire straits in which the island now finds itself.

The Swedish foreign minister, Carl Bildt, who flew into Cyprus to hold talks with Anastasiades, said Cyprus was heading for years of economic recession. "It is going to go into recession, a big slump," he told the Guardian. "A lot could have been done to stop it reaching this point. I cannot say I am optimistic, but I am also not alarmed."

Cyprus secured a €10bn (£8.4bn) bailout from the "troika" of lenders – the European Union, the European Central Bank and the International Monetary Fund – to avert financial collapse. As well as the winding up of Laiki, the island had to agree to an unprecedented levy on bank savings of more than $100,000 to fund the bailout. Earlier plans to raid the accounts of small depositors were abandoned amid fury from ordinary savers.

Cypriot banks were calm on Friday, with no big queues reported. "The situation, despite all its tragedy, has been contained," said Anastasiades.

The Cypriot president's attempt to draw a line under the crisis that has gripped the eurozone came as Slovenia, another minnow of the currency union, insisted it did not need the eurozone to rescue its troubled banks.

"We will need no bailout this year," said the Slovenian finance minister, Uros Cufer. "I am calm." Borrowing costs for the former Yugoslav republic, which has a population of two million, have jumped as investors look for the next weak link in the single currency.

The Cypriot crisis has sent shudders throughout the eurozone, where the outlook remains gloomy and unemployment rises to record levels.

Figures released on Friday showed that France failed to meet its budget deficit target in 2012 and will miss it again this year. The country's public debt has also risen to a record level.

The latest bad news came only hours after French president François Hollande had gone on live television to reassure the nation of his ability to lead it out of the economic mire.

INSEE, France's national statistics agency reported that public debt rose to €1.8 trillion, a record 90.2 per cent of GDP, in 2012, up from 85.8 per cent in 2011. France's Socialist government has already admitted it will not be able to keep a pledge to bring the deficit down to 3 per cent by the end of 2013 as agreed with the European Commission. The figure is now expected to be around 3.7 per cent, and France has asked for an extension to the deadline for reaching the target. France has not balanced its books since 1974 under successive governments of different political hue.

Powered by article was written by Jennifer Rankin, Helena Smith in Nicosia and Kim Willsher in Paris, for The Guardian on Friday 29th March 2013 19.25 Europe/London © Guardian News and Media Limited 2010


JefferiesAnd the Best Place to Work in the global financial markets 2017 is...

Register for Financial Markets News Alerts