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Cyprus set to lift restrictions on banking transactions by January 2014

September 18, 2013, 13:57 UTC+3

Cyprus is stripped from access to financial markets since spring 2011

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NICOSIA, September 18. (Itar-Tass). – Cypriot authorities plan to lift all restrictions on banking transactions, which have been introduced in March, by January 2014, as stated by the republic’s President Nicos Anastasiadis. In an interview to Bloomberg news agency he assured international creditors that Cyprus would do everything possible to successfully fulfill the agreement on crisis bailout allocation conditions in order to renew the economic activity after rough decisions of the Euro Group, including unprecedented ‘depositary haircut’.

“At present, the aim is to create conditions for growth and to solve serious issues connected with unemployment in order to stabilize the financial system,” Anastasiadis stressed. He claimed that measures of capital control were gradually lifted. “These measures will be fully abolished by January 2014,” the president stated.

Cyprus is stripped from access to financial markets since spring 2011. In summer 2012, the country’s authorities were forced to request assistance from EU and IMF partners to save the Bank of Cyprus and the second largest Cyprus Popular Bank (known as Laiki), that suffered from great losses after the EU decided to massively write off Greek public bonds. In March 2013, Cypriot authorities negotiated with the international creditors (so-called Troika) the terms of a credit in the amount of EUR10 billion. However, therefore Cyprus had to pay a high price: the president was forced to agree to liquidate Laiki and hand its sound assets to the Bank of Cyprus. The latter was, in its turn, exposed to a tough procedure of compulsive financial borrowing from major depositors for its recapitalization. These decisions made the whole banking system stop in late March for nearly two weeks, after which a tough capital control was introduced in order not to let the accounts’ holders to siphon off funds abroad.

The remaining restrictions on banking transactions basically don’t let financial organization fulfill their functions and led the economy to a state of free fall. The GDP decrease in Q1 2013 amounted to 5%, in Q2 2013 it reached 5.9%. According to creditors’ estimates, in 2013 and 2014 the recession may reach 13%, however, many experts believe these figures are conservative. The unemployment in Cyprus already reached the unprecedented 17%.

Even so, Anastasiadis expressed optimism towards the prospective of overcoming the crisis. His hopes are based on positive estimates from the Euro Group and IMF regarding the fulfillment of anti-crisis program and, therefore, the decision of international creditors to allocate to Cyprus the second tranche of financial aid.

The president also pointed to the fact that Russia expressed its trust to Cyprus, although many Russians suffered substantial losses as a result of the ‘depositary haircut’. He said that although the Russian capital partly escaped the country, Russian business people kept their offices on the island. “Germany and other EU countries are partners and friends, but we must say that Russians are also our friends and partners,” he noted. “The Cypriot economy reposed on Russian capital, investments and financial services.”

“I believe that we will be able to come back to financial markets sooner than expected,” the president said.

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