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Bankruptcy threat contained, no plan to leave euro: Cypriot leader

NICOSIA - The president of Cyprus said on Friday the risk of bankruptcy had been contained and the country had no intention of leaving the euro, in a speech laden with criticism of Europe’s currency union for “experimenting” with the island’s fate.

Conservative leader Nicos Anastasiades spoke a day after banks reopened following an almost two-week shutdown to avert a run on deposits by worried Cypriots and wealthy foreign depositors as the country raced to clinch a rescue package from the European Union.

Anastasiades said restrictions imposed on bank transactions in Cyprus — unprecedented in the currency bloc since euro coins and banknotes entered circulation in 2002 — would be gradually lifted. But he gave no time frame.

Cyprus’s difficulties have sent jitters around the fragile single European currency zone, and the imposition of capital controls has led economists to warn that a second-class “Cyprus euro” could emerge, with funds trapped on the island worth less than euros that can be freely spent abroad. In a speech to civil servants in the capital, Nicosia, Anastasiades hit out at banking authorities in Cyprus and Europe for pouring money into a crippled Cypriot bank that now faces closure under the terms of the €10 billion ($13 billion) bailout plan that averted the immediate risk of financial meltdown.

“How serious were those authorities that permitted the financing of a bankrupt bank to the highest possible amount?” Anastasiades said. “I don’t want to say more,” he added. “Now is not the time to say who bears more or less of the blame.”

Anastasiades clinched the last-ditch bailout in Brussels five days ago, but has faced a backlash from Cypriots angry at the price that came with it — the winding down of the island’s second-largest bank, Cyprus Popular Bank or Laiki, and an unprecedented raid on deposits over €100,000 that could spell the end of Cyprus as a hub for offshore finance.

The country faces steep job losses and a prolonged and deep recession. The president, barely a month in the job and wrestling with Cyprus’s worst crisis since a 1974 war split the island in two, accused the 17-nation euro currency bloc of making “unprecedented demands that forced Cyprus to become an experiment”.

But he added: “We have no intention of leaving the euro. In no way will we experiment with the future of our country.”

Anastasiades said the capital controls would be “gradually eased until we can return to normal.”

The immediate threat of national bankruptcy had been averted, he said. “The situation, despite the tragedy of it all, is contained.”