{"id":312,"date":"2013-03-25T15:09:08","date_gmt":"2013-03-25T19:09:08","guid":{"rendered":"http:\/\/www.dougsbriefcase.com\/blog\/?p=312"},"modified":"2013-03-25T15:35:33","modified_gmt":"2013-03-25T19:35:33","slug":"cyprus-euro-saved-but-things-are-not-so-good-for-cypriots-who-saved-euros032513","status":"publish","type":"post","link":"https:\/\/www.dougsbriefcase.com\/blog\/cyprus-euro-saved-but-things-are-not-so-good-for-cypriots-who-saved-euros032513\/","title":{"rendered":"Cyprus: Euro Saved! But things are not so good for Cypriots who saved euros"},"content":{"rendered":"

\"Cyprus\"<\/a>Did you cash a check today?  Or with\u00addraw mon\u00adey from your sav\u00adings account?  Or use your deb\u00adit card to buy a sand\u00adwich?  If so, many Cypri\u00adots wish they were you.<\/p>\n

The head\u00adline<\/a> is that Euro\u00adpean lead\u00aders reached an agree\u00adment with the Cypri\u00adot gov\u00adern\u00adment that will keep the island nation in the Euro\u00adzone.  For more than a week, Cyprus had teetered on the brink of default, as the gov\u00adern\u00adment tried to come up with a plan to raise 5.8 bil\u00adlion euro in a way that would please the Troi\u00adka (Euro\u00adpean Union, Euro\u00adpean Cen\u00adtral Bank and the Inter\u00adna\u00adtion\u00adal Mon\u00ade\u00adtary Fund) with\u00adout send\u00ading its own peo\u00adple into a fury.  The troi\u00adka had set today as the dead\u00adline.  Absent a solu\u00adtion it deemed accept\u00adable, it would not shell out the 10 bil\u00adlion euro Cyprus would need to prop up its wob\u00adbly banks, send\u00ading the coun\u00adtry into bank\u00adrupt\u00adcy and out of the Eurozone.<\/p>\n

The good news<\/a> is that the Cypri\u00adot gov\u00adern\u00adment met the troika\u2019s terms just ahead of the dead\u00adline .  And they did it with\u00adout con\u00adfis\u00adcat\u00ading mon\u00adey from bank accounts with bal\u00adances below the insured lim\u00adit of 100,000 euro, as an ear\u00adli\u00ader failed deal with the troi\u00adka would have required (See my pre\u00advi\u00adous blog post<\/a>).<\/p>\n

But while the gov\u00adern\u00adment agreed to keep its hands off deposits of less than 100,000 euro, con\u00adsumers may have a hard time get\u00adting their own hands on their deposits.<\/p>\n

That\u2019s because the deal\u2019s fine print includes a long list of pos\u00adsi\u00adble \u201ccap\u00adi\u00adtal restric\u00adtions.\u201d   My guess is that you haven\u2019t seen the fine print and maybe don\u2019t know what a cap\u00adi\u00adtal restric\u00adtion is.   Sim\u00adply put, these cap\u00adi\u00adtal restric\u00adtions pre\u00advent you from doing what you want with your money.<\/p>\n

The gov\u00adern\u00adment of Cyprus is impos\u00ading these cap\u00adi\u00adtal restric\u00adtions because they are wor\u00adried about two things their peo\u00adple might do: 1) take their mon\u00adey out of the banks; and 2) send their mon\u00adey out of the coun\u00adtry.  Gov\u00adern\u00adments and finan\u00adcial insti\u00adtu\u00adtions care a lot about the lat\u00adter restric\u00adtion.   One of the prin\u00adci\u00adples of the Euro\u00adzone is that the cur\u00adren\u00adcy can flow freely from one Euro\u00adpean coun\u00adtry to anoth\u00ader, just as a dol\u00adlar can be sent online from a cus\u00adtomer in New Jer\u00adsey to a mer\u00adchant in Mon\u00adtana.  In the case of Cyprus, how\u00adev\u00ader, there is grave con\u00adcern that if free flow of cap\u00adi\u00adtal is per\u00admit\u00adted, big investors will move their euro out of Cypri\u00adot banks (say, to Ger\u00adman banks) or even out of the Euro\u00adzone entire\u00adly (say, to Swiss banks).   But restrict\u00ading this sort of activ\u00adi\u00adty can dam\u00adage big finan\u00adcial insti\u00adtu\u00adtions that have to move large sums of mon\u00adey across bor\u00adders quick\u00adly.  So Euro\u00adpean offi\u00adcials are busy assur\u00ading Wall Street<\/a> and heavy hit\u00adters every\u00adwhere that these restric\u00adtions \u201cmay only last a few days\u201d.  That remains to be seen.<\/p>\n

The aver\u00adage per\u00adson, though, is much more con\u00adcerned about restric\u00adtions that the gov\u00adern\u00adment may place on con\u00adtrol of his or her own account.  Access to this mon\u00adey doesn\u2019t involve finan\u00adcial spec\u00adu\u00adla\u00adtion; it\u2019s used for much less exot\u00adic things like pay\u00ading a bill or cash\u00ading a check.<\/p>\n

And this is where the con\u00adse\u00adquences of the deal get real for ordi\u00adnary Cypri\u00adots.  They\u2019ve been cop\u00ading with the biggest and ugli\u00adest cap\u00adi\u00adtal restric\u00adtion since March 15.  The banks closed that after\u00adnoon and haven\u2019t reopened since.  They will remain closed \u201cindef\u00adi\u00adnite\u00adly,\u201d although the gov\u00adern\u00adment ordered banks to restock ATMs dai\u00adly, giv\u00ading cus\u00adtomers at least lim\u00adit\u00aded access to their funds.<\/p>\n

To pro\u00adtect banks from their cus\u00adtomers once they do reopen, Par\u00adlia\u00adment has giv\u00aden the finance min\u00adis\u00adter pow\u00ader to impose a long list of restric\u00adtions on con\u00adsumers<\/a>.  These include:<\/p>\n