Winners and Losers in the Cyprus Financial Crisis

Mar 29, 2013

Protesters gather outside the Cyprus Parliament in Nicosia - March 22, 2013.
Credit urbanlegend / Flickr

Banks in Cyprus are open for normal business for the second day, but with strict restrictions on how much money their clients can access, after being shut down for nearly two weeks to prevent people from draining their accounts as the country's politicians sought a way out of an acute financial crisis.

"They were weakened by the fact that they had too many investments in Greek companies," said Suzette Grillot. "So they've become another victim of the Greek financial crisis."

Capital controls have been imposed on transactions, however, meaning that people can only withdraw up to 300 euros a day in cash. Grillot says these capital controls mostly affect older people, those without access to ATM cards, and those who primarily rely on cash.

"Luckily, it looks like it was relatively peaceful," said Rebecca Cruise. "There was some expectation that we might see some violence here. Not being able to have access to one's money in the bank is a pretty serious way to try to operate."

Cruise says few people were talking about Cyprus a few weeks ago, but observers paying close attention weren't necessarily surprised. Cyprus is seen as a tax haven, with a great deal of international investment, particularly from Russia.

"For example, Cyprus manages about $25 billion in gross domestic product," Cruise said. "On top of that, Russian accounts within the country are $31 billion. So they're going to be feeling the [so-called "Greek] Haircut."

Grillot says most of the outrage in Cyprus comes from the Russian community, but even the Russian government is speaking out by suggesting a European power play between Russia and the so-called "Troika" made up of the European Commission, the European Central Bank and the International Monetary Fund.

"If the Russians are the ones that are going to lose out, perhaps the ones that are going to win [are] the Northern Cypriots," Cruise said. "Northern Cyprus is only recognized by Turkey, and they use the Turkish lira. They're economy is actually doing fairly well. As the Russians start looking for other places to invest, it might be in Northern Cyprus.”