NICOSIA // The feared run on Cypriot banks failed to materialise when they reopened at noon yesterday after a two-week lockdown.
Tight capital controls are in place to prevent money draining out of the traumatised island nation, and cash withdrawals are currently limited to 300 (Dh1,425) a day.
Cyprus's foreign minister, Ioannis Kasoulides, said last night that restrictions on financial transactions are to be fully lifted in a month.
In a Hollywood-style operation, armoured vehicles carrying billions of euro banknotes replenished banks on Wednesday night, with police cars escorting the cash convoy and a helicopter clattering overhead.
There were heightened security measures at banks, which urged customers not to vent their frustrations on hapless tellers, many of whom fear losing their jobs.
But despite the uncertainty caused by a controversial 10 billion bailout deal agreed with Brussels on Monday, the banks' reopening passed remarkably smoothly.
President Nicos Anastasiades, in power for just a month, tweeted his thanks to Cypriots for their "maturity and sense of responsibility" in not panicking at "a critical time".
He also announced that he was slashing his salary by 25 per cent while cabinet members would take a 20 per cent wage reduction.
International camera crews easily outnumbered customers queuing calmly outside neighbouring branches of the island's two main banks in Nicosia's central Eleftheria (Freedom) Square.
Many waiting in line were elderly people who said they had run out of cash because they did not have bank cards.
An employee of the Bank of Cyprus politely asked them to show "patience and understanding". Demetris Antoniou promised: "We will give you the maximum service we have."
Beside him, an unarmed local employee of the British-based security firm G4S smiled benignly behind his aviator sunglasses. "We never expected any trouble," he said. "Cypriots are law-abiding and peaceful."
Yet they are also distraught, dismayed and feel betrayed by their European Union partners.
Kostas Nikilaou, a 60-year-old pensioner, said the uncertainty of the past two weeks had been "like a slow death". He added: "I feel a sense of fear and disappointment having to queue up like this - it feels like a Third World country. This is what they [international lenders] imposed on us and we have to live with it."
Outside the Laiki Bank, Marios Panayides, a 65-year-old retired civil servant, said: "Our previous government made mistakes, but our EU partners have also been very harsh and shown very little solidarity."
Under the deal agreed on Monday, Cyprus has to raise 5.8bn to qualify for a 10bn EU-IMF bailout. This requires major reforms to its oversized banking sector, while depositors with more than 100,000 in the island's two largest banks, Bank of Cyprus and Laiki, many of them Russian, face losing a large chunk of their money.
But in Eleftheria Square, an MP for the ruling Disy party pointed out that the terms of the bailout targeted not only foreign tycoons but "ordinary Cypriot businesses".
"We want to believe that our partners in the EU will understand what they have done," Prodromos Prodromou said.
Cyprus's foreign minister was more blunt. "Europe is pretending to help us but the price to pay is too high: nothing less than the brutal destruction of our economic model," Ioannis Kasouldides told the French newspaper, Les Echos.
Under the bailout agreement, Laiki Bank will be wound down, with its good assets merged into Bank of Cyprus.
Cypriot officials insisted the strict capital controls, unprecedented in the EU, would be temporary, lasting just days. But many experts believe they may endure for weeks or even months.
"This is a typical set of exchange-control measures, more reminiscent of Latin America or Africa," Bob Lydon, general secretary of the international banking association, IBOS, told Reuters. "These are permanent controls until the economy recovers."
The imposition of capital controls has led economists to warn that a second-class "Cyprus euro" could emerge, with funds trapped on the island less valuable than euros that can be freely spent abroad.
Aside from restrictions on cash withdrawals, credit and debit card use abroad will be limited to 5,000 a month.
There is a ban on cashing cheques, and travellers from Cyprus will not be able to take out more than 1,000 in cash. To allow trade to continue, businesses will be allowed to pay for imports if they provide authorities with "the relevant documents".
The Cypriot stock market announced it would remain closed again yesterday "in order to ensure" its "smooth functioning" and "protect investors". It has been shut since March 16.
Police sources said passengers leaving Cyprus's airports are now subject to extra searches, with officers ordered to confiscate cash above the 1,000 limit.