BRUSSELS--The capital controls imposed by Cyprus must only be in
place for "a few days," Europe's internal market and services
commissioner said Monday, amid uncertainty over the island's
financial future.
"Measures to restrict or limit free movement of capital can only
be temporary," Michel Barnier said.
"We are now working with the Cypriot authorities...This is a
limit on movement which may only last for a few days," he told
reporters at a press conference at the European Commission in
Brussels.
Cyprus has restricted the free flow of money to and from the
island in recent days as it fought to overcome a financial panic
that risked the country's exit from the euro zone, which would be
the first member state to do so. Banks on the Mediterranean island
have been shut all week and are due to reopen on Tuesday.
Late Friday, the Cypriot parliament approved capital controls
and legislation to wind down banks in an effort to avert financial
collapse, days after rejecting a European bailout plan that would
have imposed a tax on all bank depositors.
Cyprus finally secured a bailout early Monday that lines up 10
billion euros ($13 billion) in financing for the government and
shuts Cyprus's second-largest bank, Cyprus Popular Bank PCL
(CPB.CP), imposing steep losses on deposits of more than
EUR100,000, European officials said.
Officials said they believe the country will now need strict
controls on money transfers in and out of the economy in the coming
weeks or possibly months, cutting off its citizens and companies
from much of the rest of the euro zone's financial system.
Mr. Barnier stressed that free movement of services and capital
are a defining feature of the EU's free market, and that capital
controls are only justified temporarily in Cyprus due to the
"severity of the crisis".
"That may only be temporary, for a certain number of days," he
said.
Mr. Barnier also said the characteristics of Cyprus's banking
sector are unique and "exist nowhere else" in the EU, and that
those with smaller savings in other euro-zone states shouldn't fear
for the safety of their deposits.
"I'd like to state clearly that never, anywhere in Europe, is
the protection of savers under EUR100,000 something that has to be
called into question."
Write to Tom Fairless at tom.fairless@wsj.com
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