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More panic than real problems in Cyprus

28 March 2013 / 18:03:15  GRReporter
4415 reads

Victoria Mindova

Cyprus remained without banks for twelve days - a situation which in Greece is often compared to a martial law or a natural disaster. It turns out that it is neither of the two. GRReporter has contacted representatives of the real business, who are the active part of society, both in Greece and in Cyprus, to present to us their perspective on the developments.

"Undoubtedly, this was shocking to Cyprus, but the biggest enemies of the country were rumours and uncertainty. Otherwise, the credit cards worked and there was money in the ATMs. There was a ceiling on withdrawals, which the different banks had determined, but the money was not stopped. We were working with limited liquidity for a week but it is now behind us," said in a conversation Nicholas Hitas, who is a Cypriot from Nicosia. He is the head of the Mediterranean Centre for Public Speaking and Communication.

The branches of financial institutions are operating normally on the first day after the calming of the banking crisis. There are long queues and it takes a long time to reach the counter, but there is no panic. At night, five containers with a total of five billion euro arrived in Cyprus directly from Frankfurt, where the European Central Bank is located, to help local banks meet the first shock wave of cash withdrawals. "The police were patrolling throughout the night and helicopters with searchlights were flying round to protect the banks from possible attacks."

The Cypriot explains that it is imperative that banks avail cash now more than ever. "The people who are scared or who have to make urgent payments will run to the banks to withdraw their savings. We are still waiting to see how great the demand will be." Hitas himself states that he does not intend to withdraw his savings from the local bank. "All people holding deposits under 100,000 euro have nothing to worry about. Those with deposits over 100,000 euro cannot withdraw them and transfer them to a foreign bank as now some restrictions are in force."

On a personal level, people are concerned about what changes will happen in their lives. "Bank employees fear that they will lose their jobs." Although the rescue programme for the financial sector is already underway, the feeling of uncertainty has not completely disappeared.

The entrepreneur states that despite the difficult situation, Cypriots did not resort to mass protests against the upcoming changes as we are used to seeing in the reports from the streets of Athens. "Mass protests are not a tradition in Cyprus as is the case in Greece. People are now more concerned about what will happen in the future rather than protesting today," says Hitas. The issues related to the development of oil fields, the attraction of new investment and the economic recovery are in the foreground. "I expect that the situation in the country will return to normal within a week," forecasts Hitas.

After the financial institutions opened, the queues at the branches of Cypriot banks in Greece were huge. "I waited an hour and a half to withdraw 600 euro to pay my customers," a young entrepreneur from Greece told GRReporter. 10 years ago, along with his friends, they founded the company, whose main business activity is imports and exports. After years of development, they now employ six people with whom they are running the business.

"We had never expected that things would change so much for the worse." The entrepreneur states that the company's operating costs are 20% lower compared to the good years. During the debate on the type of the bailout, electronic payments were restricted too. "It is good that the crisis was overcome by the end of the month, when we pay the salaries of the staff. We have no available funds to pay the monthly salaries of the people and they would have remained without a dime."

Bank employees did not warn the people who are running a small business that there was the probability of Cypriot branches in Greece being closed. Even branch managers were not aware that banks would not open on 19 March.

"We paid the VAT on the last date. We were lucky that we were able to meet the deadline. If banks had remained closed for a few days more, the tax authorities most probably would have imposed a fine for not meeting the deadline for paying the tax."

One of the most serious problems remains the settlement with foreign partners. In this case, there is no way to explain the insolvency during the specific period. "We had difficulties as regards the settlement with local suppliers and customers. They demonstrated their understanding and waited until the bank reopened."

The young entrepreneur disagrees with the statement that salaries in the country must be further reduced. "People have already lost a large percentage of their purchasing power. If salaries are cut, everyone will definitely go bankrupt." Greece’s microeconomics is on the verge of solvency. If you have no obligations to the state, you have difficulties paying your debts to banks or private collaborators.

Piraeus’ taking over the Cypriot branches has relieved the activities of businessmen to some extent. However, they worry that sooner or later, there will be a second wave of the banking crisis that will hit Greece this time. The assurances from the officials in Greece do not carry any weight. Promises that things are improving have been heard many times over the last three years, in which the Greek economy lost 20% of GDP instead of improving.

"We are not planning to transfer operational accounts to another bank but I expect that in the coming weeks, there will be a significant withdrawal of capital from the former branches of Cypriot banks," forecasts the young entrepreneur. He sees a dead-end in the present situation.

Business people want to continue to work and produce, but the conditions in the country are becoming more difficult. They fear the possibility of imposing mandatory "fees" on deposits. "These are our operating funds in the banks. They are the result of a normal business activity that has been already taxed and we use them to pay the customers, the state and the staff." They say in Greece that if the state tries to take these funds by cutting the deposits in order to fill other holes in the economy, this will completely destroy entrepreneurs.


Tags: EconomyMarketsCyprusRescue programmeGreeceCrisis
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