Cyprus central bank lifts limits on domestic debit- and credit-card transactions to boost spending

2013-03-30T00:00:00Z Cyprus central bank lifts limits on domestic debit- and credit-card transactions to boost spendingThe Associated Press The Associated Press
March 30, 2013 12:00 am  • 

NICOSIA, Cyprus - Cyprus's central bank tried to kickstart spending in a country left reeling by a 10-day bank closure and financial near-collapse by telling Cypriots Friday that there were no limits on domestic debit- and credit-card transactions.

The central bank made the announcement to clarify the capital-control rules it introduced this week to prevent a run on the country's banks.

The banking authority said that, while there is a 5,000 euro ($6,402) limit on credit- and debit-card purchases abroad, there are no such limits on similar domestic transactions and money transfers.

Cyprus' banks reopened Thursday after being ordered shut March 16 to prevent people from draining their accounts as politicians scrambled to save the country's stricken financial sector.

The country on Monday agreed to make bank bondholders and big depositors contribute to the rescue in order to secure 10 billion euros ($12.9 billion) in loans from the eurozone and the International Monetary Fund.

One bank, Laiki, is to be split up, with its nonperforming loans and toxic assets going into a "bad bank." The healthy side will be absorbed into the Bank of Cyprus. Savers with more 100,000 euros ($128,000) in both Bank of Cyprus and Laiki will face big losses - possibly as much as 80 cents on the euro.

Fearing savers would rush to empty their accounts once the banks reopened, the country imposed daily withdrawal limits of 300 euros ($384) for individuals and 5,000 euros for businesses - the first capital controls that any country has applied in the eurozone's 14-year history.

Cyprus' president called on the country Friday to "share the burden" of solving its financial crisis.

"The deal we agreed on, after the dramatic hours we all lived through last week, is without doubt painful," President Nicos Anastasiades said during a speech at a civil-servants union convention.

"Everyone will have to make sacrifices as our financial situation, in the violent way in which it has developed, will oblige all of us to share the burden" to reform the economy, he added.

Banks opened normally Friday for the second day without a feared crush of people trying to get at their money.

"This is a situation imposed on us, but we will get over this as well, said Yiannis Athienitis outside a Nicosia convenience store. "The restrictions are, of course, helpful at these times, in order to avoid panic."

Other restrictions include a 1,000 euro ($1,282) cap on the amount people are allowed to take with them on trips abroad, prompting criticism from some travelers.

"A thousand euro per person to get out of the country is a very little amount," said Modestos Christodoulou at Larnaca airport before catching a flight to London. "How are you supposed to live on just a thousand euros? It's impossible."

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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