THE WEEK THAT WAS... (July 08, 2013)

A silly question? Not for Cyprus President Anastasiades saying last week: ‘Cyprus is already out of the Eurozone’, citing the restrictions on the movement of euros from Cyprus as evidence that a euro from his island has a different status and value from the other Eurozone members. Cyprus had made ‘a silent, hidden exit from the euro’, told Guntram B. Wolff, director of the well-known Brussels based think tank Brueghel. Despite a softening of restrictions, he added, ‘the euro in Cyprus is not the same as in other euro countries’. There is no longer a single currency in Cyprus.

The Maastricht Treaty of 1992 is very clear: no restrictions on the movement of capital in the European Union, it says. But the rigid capital controls introduced in March still snarl businesses and ordinary Cypriots in a web of red tape. It is still forbidden to cash checks or to open a new account unless a previous one existed in the same bank. Individuals can withdraw no more than €300 a day, while the limit for companies is set at €500 a day. It is also illegal to carry out more than €3000 out of the country. There is also a wide gap in interest rates between Cyprus and the rest of the eurozone: 7.75% on longterm loans in Cyprus, in Germany for instance 3 to 4%. But as somebody said, this issue is increasingly academic. Most banks in Cyprus have stopped issuing loans anyway.

The Cypriot authorities initially said their controls would last just a week and then extended them to a month. Now, they have been in force for more than three months. But while already de facto partly out of the eurozone, Cyprus still does not enjoy the main advantage of having a separate currency: the freedom to use the instrument of devaluate.