Cyprus institutes capital controls

The government of Cyprus has introduced draconian restrictions on capital to prevent a bank run and capital flight.

Photograph: Getty Images

The Prodigal Greek blog reports on the capital controls Cyprus is introducing:

Here is what a cash economy looks like:

  • Restrictions in daily withdrawals
  • Ban on premature termination of time savings deposits
  • Compulsory renewal of all time savings deposits upon maturity
  • Conversion of current accounts to time deposits
  • Ban or restrictions on non cash transactions
  • Restrictions on use of debit, credit or prepaid debit cards
  • Ban or restriction on cashing in checks
  • Restrictions on domestic interbank transfers or transfers within the same bank
  • Restrictions on the interactions/transactions of the public with credit institutions
  • Restrictions on movements of capital, payments, transfers
  • Any other measure which the Finance Minister or the Governor of Cyprus Central Bank see necessary for reasons of public order and safety

That's how you prevent a bank run, I suppose. But it does rather limit the benefits of actually being in the euro in the first place.

We'll see if it works – where "works" means prevents total collapse of the Cypriot economy, because even the damage imposed by these measures is something most nations would rather avoid – when the banks reopen, which is currently expected to happen on Monday.