Banking Crisis in Cyprus Makes Cash the King

by Dr. Enozia Vakil on Mar 23 2013 1:35 PM

 Banking Crisis in Cyprus Makes Cash the King
As country battles acute banking crisis, retailers in Cyprus demand hard cash for their goods, making residents worried that they will run short of cash due to the banks being closed.
With no end in sight to the turmoil, petrol stations, cafes, restaurants and neighbourhood kiosks are insisting on payment in cash, rejecting outright debit and credit cards and cheque transactions.

Some larger stores were still accepting plastic, however.

"We have pressure from our suppliers who want only cash. I have no option but to ask for cash from my customers," said Demos Strouthos, manager of a restaurant in central Nicosia.

"In the past three days I have seen a 70-percent fall in business. Usually on Fridays and weekends my restaurant is fully booked. But for the next three days I hardly have any bookings. I don't know whether I will open next week."

On Friday the embattled Cyprus government was scrambling to find a solution to the country's worst crisis in decades.

The European Union has given Nicosia until Monday to raise 5.8 billion euros ($7.47 billion) to unlock loans worth 10 billion euros or face being choked from European Central Bank emergency funding in a move that would bankrupt the island.

EU sources have said the bloc is ready to eject Cyprus from the eurozone to prevent contagion of other debt-hit members such as Greece, Spain and Italy.

Cypriot MPs were to meet in emergency session later on Friday to debate a raft of bills aimed at raising the funds.

An AFP correspondent said petrol stations in the capital still had fuel, but they were insisting on cash payments.

"I take only cash now. Every two days I have to pay my supplier in cash. I am not taking credit or debit cards, especially cards of Laiki Bank (Cyprus Popular Bank)," said the manager of one fuel station on Makarios Avenue.

The Popular Bank is facing a run after reports that the island's second largest bank could be the first to collapse as the government battles to save the recession-hit economy.

Friday saw another day of anxious Cypriots queueing outside Popular Bank ATMs in Nicosia to withdraw whatever funds they could.

Petrol Owners Association chairman Stephanos Stephanou said fuel stations were in danger of closing if they did not have cash to refill their huge tanks.

The island has enough fuel reserves, but the petrol station owners were running out of money to pay for more supplies.

People withdrawing cash from ATMs said they will soon run short if the banks fail to reopen as currently scheduled on Tuesday after being closed for seven days. The last day banks in Cyprus were open was exactly a week ago.

"I have withdrawn 260 euros just now. That is the daily limit now. I have some cash at home, but how long can that last?" asked Albert Tutundjian after withdrawing money from one Popular Bank ATM.

He said people were also afraid of hoarding money in their houses.

"It's unsafe. Having too much cash at home is a straight invitation to burglars. Crime will rise in Cyprus if we do not tackle the situation," Tutundjian told AFP.

On Friday, some large clothes shops and department stores in the capital were still accepting credit and debit cards.

"Our business is a bit different. I don't have to make immediate payments to my supplier who is in Spain," Peter Hadji Thomas, who manages five fashion outlets across Cyprus, told AFP.

"In fact yesterday two thirds of my payments were in cards. But how long will this last? We have to wait and see."