Financial services made up large portion of island’s economy, and critics worry new measures will destroy trust.
Nicos Anastasiades, the Cypriot president, has pledged that his country will not leave the eurozone, but has criticised international lenders behind the huge bailout that saved the country from bankruptcy.
Anastasiades’ comments came as banks resumed normal trading on Friday, a day after they reopened their doors following a nearly two-week lockdown.
Cypriots continue to face hardship under the eurozone’s first ever capital controls, although Cyprus’s central bank did lift a 5,000 euro ($6,400) ceiling on credit and debit card transactions within the country on Friday.
The 10bn euro ($12.82bn) EU-IMF rescue deal imposed a levy on big bank deposits and calls for tough banking reforms, causing jitters among other eurozone countries, who fear they could be next.
Anastasiades, who was elected in February on the back of a promise to secure a bailout for the small eastern Mediterranean island, said the deal had saved Cyprus from “economic collapse”.
“We will not leave the euro and I stress that,” state media quoted him as telling a conference of civil servants. “We will not engage in risky experiments that will endanger the future of our country.”
Criticism for lenders
The Greek Cypriot leader criticised other eurozone states for enforcing the tough terms of the deal agreed after all-night talks in Brussels on Monday.
“Nobody can ignore the insensitivity of our partners,” he said. He also took aim at both international lenders and the previous government for pouring money into the country’s second largest lender Laiki, or Popular Bank, which will be wound up under the terms of the bailout.
“I honestly question the seriousness of the position of those authorities which allowed the financing of a bankrupt bank to the highest possible amount,” he said.
Anastasiades received the apparent backing on Friday of Carl Bildt, the visiting Swedish foreign minister, who tweeted that the EU “pumped money into [an] unsustainable situation” and “could have pulled the plug earlier”.
The bailout calls for severe cuts to Cyprus’s prized tax-haven style banking system – bloated with Russian money and exposed to toxic Greek debt – and also threatens to deepen the economic recession the island is suffering.
The most controversial element is the unprecedented one-time levy on deposits over 100,000 euros ($128,000), a move which sparked fears that domestic and foreign investors would make a run on the banks when they reopened on Thursday.
The panic failed to happen and banks returned to normal hours on Friday, opening at 8:30am (06:30 GMT) and closing five hours later. Small queues built up outside many branches before they opened.
Draconian controls to stop a run on the banks, including a daily withdrawal limit of 300 euros ($385) and bans on cashing cheques or taking more than 1,000 euros ($1,280) in cash out of the country.
Anastasiades said the restrictions, officially in place for a week, would “gradually ease until we can return to normality” but did not specify a time.
Ioannis Kasoulides, foreign minister, said on Thursday that they were likely to last for at least another month.
Cypriots are already feeling the pinch from the controls.
Withdrawal and transfer limits have made it hard for small businesses to pay salaries and for families to make rent payments, especially as both tend to fall around the end of the month.