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Bank closure leaves Cyprus businesses high and dry and low on cash

Bank closure leaves Cyprus businesses high and dry and low on cash

March 23rd, 2013 in News

NICOSIA, Cyprus (AP) - At Jenny Dobreva's a convenience store, a customer comes up to get a lighter. She apologetically turns him away. It's not because he doesn't have enough money - it's because she doesn't have enough change.

Such scenes are happening everywhere in Cyprus, one of the many everyday problems that are having a crippling effect on the economy as a bailout crisis keeps banks closed for more than a week. While ATMs still function and people can get cash, they run out frequently. More and more stores no longer accept credit and debit card payments. Businesses have found themselves unable to pay suppliers or their employees - and few people want to shop in a crisis like this.

The mounting problems are slowly stifling this country of just over 800,000 people.

The banks have been shuttered since last weekend as frantic politicians try to avert a run on savings while they come up with a better plan to stave off bankruptcy than the one imposed by international creditors: seizing part of bank deposits. The idea that suddenly the state could dip into people's accounts and just take their money sparked outrage and fear. Not a single lawmaker voted in favor of the bill when it was brought to parliament.

Limiting access to funds as an alternative was sought was essential to prevent mass withdrawals that would trigger a brutal banking collapse.

But it's all left businesses across the country in the lurch.

Everyone from shops and restaurants to taxi drivers normally get bags of coins each morning when they deposit their previous day's takings. But these days that's impossible. Then there is merchandise stock to be paid for, orders to be filled, wages to be settled, fuel tanks to be filled - all commonplace transactions that are now blocked.

"When the banks are closed, it's like we are the living dead," said florist Stelios Stylianou, tidying a colorful window display of large flowering plants in the usually bustling old town. "We can't make any withdrawals, we can't make deposits, pay our suppliers ... They have to open because it's causing a huge problem."

But the earliest that will happen is Tuesday.

As ATMs quickly run out, frustrated customers try machine after machine in a desperate search for cash. On Thursday night, the country's troubled second largest lender, Cyprus Popular Bank, or Laiki, imposed a 260 euro daily withdrawal limit, down from about 700 euros, after depositors swarmed its ATMs when it became clear the bank would be restructured, and rumors swirled it might even shut down completely.

Merchants have also started turning away credit cards. By Friday morning, some retail stores and coffee shops had handwritten notes taped up by the till: "Cash only please!" Complaints that gas stations were insisting on cash only transactions prompted Gas Stations Association head Stefanos Stefanou to issue a statement saying there was no fuel shortage, and that 260 of the country's 280 gas stations were accepting credit cards.

But not everyone has a credit or debit card. In a country where the little bank book is still widely used to withdraw or deposit money, especially by the older generation, some have been left without any access to their accounts.