Cyprus businesses squeezed by bank closure

(NICOSIA) - With banks in Cyprus closed for the 11th straight day on Tuesday, businesses were finding it increasingly difficult to operate, amid concerns some of them might even have to shut down.

The small Mediterranean island, with a population of less than a million people, is heavily reliant on imports -- from food, fuel and medicines to household goods and machinery.

But with international transfers blocked since March 16, some wholesalers are unable to order goods or they face problems clearing through customs those that have already arrived.

On Friday, among measures needed to obtain a bailout from international lenders, the Cypriot parliament approved the imposition of capital controls that would include restrictions on transfers abroad. But exactly how they will operate once the banks reopen remains a mystery.

Marios Tsiakkis, secretary general of the Cyprus Chamber of Commerce and Industry, told AFP that "many companies are being driven to bankruptcy. Their operations with the external world are frozen."

Andreas Agrotis, who runs Amalthis, the island's largest importer of fruits and vegetables, said he has a container arriving in port on Thursday.

"I need to find 7,000 euros to get the goods, or they will stay there until I get the cash," he said.

"The most important things is that the banks reopen so we can understand what effect this will have on our business," he said, pointing out that for apples and other fruit he brings in from Latin America he has to pay up front.

Agrotis said his company is healthy, but that he will have to curtail his activity if he cannot get authorisation to pay his suppliers.

Andreas Adamides, financial director of medicines and cosmetics importer Papaellinas, expressed similar concerns.

"Our business is doing very good, but we need to know what kind of restrictions we will have on our payments abroad," he said, not ruling out that their could be some shortages in the months to come.

Athienitis, a popular low-priced grocery store in Nicosia, has felt compelled to impose a cash-only policy, said one of its managers, Stratos Hadjichristofi.

"I had enough reserves until now to accept cheques and credit cards, but since banks are not reopening, and we don't know anything for certain, I can't continue and put my company in danger."

He also pointed to another problem -- hoarding -- which has pushed sales up by more than 30 percent over the past 10 days.

"People were panicking that there could be a food shortage, so they came and made stocks of pasta, rice and lentils."

"We haven't been out of stock of anything, so far."

On Saturday, at a branch of the pricier Alpha Mega supermarket, one shopper told AFP, "It looked like Christmas time. People's trolleys were packed to the hilt."

Meanwhile, other businesses are threatened by the imminent winding-up of the country's second largest lender, Laiki Bank, and the restructuring of the largest, Bank of Cyprus.

Michael Michael, professor of trade theory at the University of Cyprus said many firms are clients of those banks.

"It is the end of many companies, especially small ones," he said. "It's a disaster. Some will go bankrupt; others who were doing okay until now will have to reduce their operations drastically."

Finance Minister Michalis Sarris said on Tuesday that Cyprus was facing an "emergency" and an "unprecedented experience" but added that he thought the banks would be able to open on Thursday.

And he said that financial controls imposed by the government to limit how much Cypriots can withdraw or transfer should be lifted in "a matter of weeks," without specifying the conditions.