Banks in Cyprus Re-Open For the First Time in Two Weeks

After a shutdown of nearly two weeks, banks on the Mediterranian island of Cyprus re-opened on Thursday after the Cypriot parliament agreed to terms of a bailout from thr European Central Bank.

Branches were replenished with cash overnight and police were deployed amid fears of a run on the banks.

Some queues did form but the mood was calm, and the country's president thanked Cypriots for their "maturity".

The restrictions on the free movement of capital represent a profound breach of an EU principle, correspondents say.

However, the European Commission on Thursday justified the move, saying the "stability of financial markets and the banking system in Cyprus constitutes a matter of overriding public interest".

Information from the Central Bank of Cyprus released on Thursday showed that foreign depositors had already withdrawn 18% of their cash from the nation's banks during February, before the current crisis hit home.

The deal effectively wipes out Cyprus’s appeal as an international banking haven but saves Europe from cutting off support to one of the 17 nations that use the euro currency.

The deal reached with creditors makes Cyprus the first Eurozone nation to have capital controls imposed on depositors. The restrictions include prohibiting Cypriot nationals from travelling abroad with more than €1000, limits of €300 on daily withdrawls and a €5000 per-day limit on transactions by businesses. Experts say these capital controls could be in place for several months before being phased out.

Cyprus Popular Bank, which is also known as Laiki, will be shut down and assets transferred to the Bank of Cyprus. Losses on accounts with a balance €100,000 or more will reportedly be converted into shares of the Bank of Cyprus. Larger depositors have found ways around the nearly 2-week long bank closure by withdrawing funds from foreign branches of Laiki and Bank of Cyprus. Financial experts believe that most of the Russian funds in Cypriot banks when banks were closed across the island have since been repatriated.

One unusual outcome of the Cypriot financial crisis is the increased interest in bitcoin by depositors with money in Cypriot banks. The three year old virtual pseudo-currency was created by hackers three years ago and has increased in value some 87% since the EU and Cyprus began negotiating over the terms of the latest bailout.