Cyprus announces further easing of domestic currency restrictions

Cyprus announced further easing of domestic capital restrictions on Friday, saying all requirements for control relaxation had been fulfilled. A decree by the Cyprus Ministry of Finance said all restrictions on time deposits were lifted, meaning that an automatic renewal of fixed-term deposits had been scrapped, allowing depositors to withdraw their money for the first time since restrictions were introduced in March 2013. Cyprus was forced to introduce tough restrictions on all bank transactions to prevent a capital flight when it accepted a bailout of 10 billion euros (13.7 billion U.S. dollars) by the Eurogroup and the International Monetary Fund, involving a haircut of uninsured deposits to recapitalize its main lender. The ministry's decree also increased money transfers between individuals from 15,000 euros to 20,000 euros for any reason per month and from 75,000 euros to 100,000 per month between legal entities. A provision banning cashing in cheques and a limit of 300 euros on daily cash withdrawals still remains in force. The daily cash withdrawal is cumulative, meaning bank customers can add up their daily withdrawal allowance. An official statement said that the relaxation of restrictions imposed on March 27 last year was made possible after all stages of the second phase of the economic adjustment program were completed. These included the disbursement of 1.5 billion euros for the recapitalization of the Cooperative Bank, the submission of a plan for the restructuring of the cooperative credit societies, the recapitalization of Hellenic Bank and the approval of the restructuring of Bank of Cyprus by the Cyprus Central Bank. Friday's decree still leaves in place transfers of capital outside Cyprus. Central Bank Governor Panicos Demetriades said last week that he hoped all restrictions on bank transactions could be abolished by the end of this year if sufficient progress was made in applying the bailout program and confidence was fully restored in the economy and the banking system. A team of technocrats representing the European Commission, the European Central Bank and the IMF concluded their third survey of the Cyprus economy since the bailout deal, giving the thumbs up for the achievements of Cypriot authorities. They said public finances did better than predicted, the contraction of the economy was much lower than original projections and that despite dangers lying ahead, the restructuring of the banking system was proceeding well. Cyprus expects to get a further tranche of loan money by the European Support Mechanism and the IMF, totaling 236 million euros, if the troika's report is approved by a Eurogroup meeting on March 10.