Cyprus determined to keep place in euro area, president says

April Meeting

Cyprus’s bailout accord will be discussed at a meeting of euro area finance ministry officials on April 4, Greece’s state-run Athens News Agency reported today, citing comments by Cypriot Labor Minister Haris Georgiades.

There were few queues at banks in Nicosia today. The institutions opened at midday local time yesterday to allow staff to prepare and opened for normal business hours today. The Bank of Cyprus, the nation’s biggest lender, which is being restructured as part of the EU deal, said late yesterday that all transactions were smooth.

“You have two euros within Europe because the Cypriot euro is no longer equal to the euro in the other 16 countries,” Pacific Investment Management Co.’s Mohamed El-Erian, chief executive officer of the world’s largest bond-fund manager, said yesterday in an interview on “Bloomberg Surveillance” with Tom Keene. “This is truly a very, very historic time.”

Euro Banknotes

Cyprus’s restrictions include bans on terminating time deposits and cashing checks. Customers can transfer abroad at most 5,000 euros per month from a given financial institution. Euro banknotes were supplied to Cyprus as a precaution, a spokesman for the Bundesbank in Frankfurt said yesterday.

Cyprus in June became the fifth euro-area nation to request a rescue after Greece’s debt restructuring crippled lenders including Bank of Cyprus and Cyprus Popular.

The 18 billion-euro economy is the third-smallest in the 17-nation euro area. Before the bailout, which was coupled with an austerity package, the European Commission predicted a contraction of 3.5% in 2013.

Economists, including Gabriel Sterne, an economist at Exotix Ltd. in London, have said the damage will be far greater as the losses for uninsured depositors and an increase in corporate taxes to secure the bailout hurt the island’s reputation as a financial hub.

Euro countries such as Malta and Slovenia have been quick to distance themselves from the crisis that forced Cyprus to accept the conditions for the funding with the EU and the International Monetary Fund on March 25.

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