Cyprus waits for its 'giant leap back into the dark'

Helena Smith in Nicosia guardian.co.uk, Wednesday 27 March 2013 22.09 GMT

With the country's banks finally poised to reopen, there is anger and fear – but above all uncertainty

Cypriot flags during an anti-bailout rally outside the presidential palace in Nicosia, three days after the bailout deal was agreed. Photograph: Yannis Behrakis/Reuters

Small countries feel the onset of poverty quickly. In Cyprus, now poised to become one of the biggest experiments in global financial history, people know that penury is just around the corner.

Waiting for poverty to strike is no game. It makes ordinary men and women helpless, desperate and scared. "If you look at it mathematically, there is no way out: we will just never be able to repay our bills to the EU and IMF," said Haris Christou, one young Cypriot speaking for his compatriots. "Am I afraid? Of course I am afraid. Everybody knows everything in Cyprus is going to get bad, really bad. And nobody knows where exactly we are headed."

On Wednesday night men and women, some young, some old, gave voice to that fear. They gathered outside the offices of the European commission, and then lined the road that leads up to Cyprus's colonial-era presidential palace, to protest against a rescue programme that, wittingly or not, will destroy their country's banking sector and bring its economy to its knees.

"Out with the troika", "Fuck the troika", "Go home Troika", said the placards. "No to the policies of austerity." "No to privatisations." "No to the memorandum of catastrophe."

But more than words, or any amount of hoarse chanting, it is uncertainty that now speaks loudest in Cyprus. The uncertainty that has come with the knowledge that the island's economic output will shrink dramatically as a result of the austerity now being demanded in return for €10bn in aid. The uncertainty unleashed by policies that will see many Cypriots wake up with much less than they once had in the bank. And the insecurity of suddenly being the subject of capital controls that possibly could change Cypriots' lives for years.

"Countries don't normally go backwards," said Leda Georgiadou, a woman in her 50s. "With this rescue we have taken a giant leap back into the dark."

On Wednesday, the third day of Cyprus's status as a bailed-out nation, that leap came in the form of restrictions on the movement of money in and out of the divided island.

Anger is now not the only sentiment talking Cyprus. Greek Cypriots are more afraid than their cousins in austerity-whipped Greece because they know that what is heading their way is like nothing else to have hit Europe's southern periphery since the outbreak of the debt crisis.

The closure of the banks, which for the past 12 days has left streets, shops and restaurants eerily quiet – and thousands rushing to cash machines to withdraw money – was the first sign.

"In our case, the dogma of shock started on 15 March with the haircut," said Giorgos Doulouka of the communist Akel party, referring to the massive losses expected to be enforced on depositors holding over €100,000.

"People who bother to attend demonstrations are shocked and terrified, but I can assure you that those who stay at home are shocked and terrified, too."

In the race to prevent a mass capital flight from banks when they finally reopen on Thursday, the central bank has been working around the clock since the announcement of the €10bn aid deal to draw up measures that will stop money flooding out of the island.

At least half of the total €68bn (£58bn) currently deposited in Cyprus – in a banking system that until this week was at least eight times the size of the nation's economy – is held by Russians.

Among the items of emergency legislation being announced was a ban on cheques being cashed, a prohibition on anyone leaving the island with more than €3,000 in banknotes, and the imposition of a €5,000 upper limit on monthly credit card spending. Cash withdrawals have already been limited to €100 following revelations that the island's second largest lender, Laiki, would be shut down altogether.

Already dazed by the news that their once vibrant economy was a basket case – in poorer shape than even that of debt-stricken Greece – it is unclear how Cypriots will react to this latest bombshell.

In a bid to placate them, President Nicos Anastasiades's government has said that the emergency restrictions will be in place for no longer than seven days, to allow the island to come to terms with the fallout from the EU- and IMF-sponsored rescue deal.

"We are like an animal under experiment now," the former governor of Cyprus's central bank, Afxentis Afxentiou, told the Guardian. "I hope that no other country experiences [anything like] it … curtailing deposits has been like an earthquake," he said, lamenting the lack of solidarity shown to Cyprus by fellow eurozone states. "No one, including myself, expected the EU and ECB and IMF to behave in such a manner."

A man of a normally sunny disposition, like so many of his compatriots, Afxentiou admitted that his homeland is likely to feel the full impact of the plummeting living standards that will accompany recession for several years. But he drew strength from the knowledge that Greek Cypriots have been through dark times before – losing more than 70% of the island's resources when Turkey invaded in the wake of a coup aimed at uniting Cyprus with Greece in 1974.

"Forecasts in economy are a very dangerous thing," Afxentiou said. "But what I know is that we have lost everything before, almost all our resources, and rebuilt ourselves and our economy. We can do it again."

G4S on guard

Private security firm G4S, slammed for failing to provide enough security guards for the London Olympics, will dispatch 180 staff to all bank branches across the island in an attempt to ensure that the reopening goes smoothly. Their deployment will keep a lid on any possible trouble, said John Argyrou, managing director of the firm's Cypriot arm. "Our presence there will be for the comfort of both bank staff and clients, but police will also be present."

Argyrou didn't foresee any serious trouble once banks open because people had time to "digest" the extraordinary events of recent weeks. "There may be some isolated incidents, but it's in our culture to be civil and patient, so I don't expect anything serious," he said. A further 120 staff from G4S would be assigned money transport duties, Argyrou added. G4S staff have been working overnight to restock cash machines heavily used since branches were closed nearly a fortnight ago. This year G4S revealed that it had lost £88m over the Olympics fiasco, in which the company was unable to supply all the 10,400 guards it had promised. AP

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