Cyprus makes frantic effort to prevent run on its banks

What did they expect, people are just not going to do this? Not while they can withdraw their cash and get out. Top down run your life EU was a bad idea from the start.

The UK Gaurdian reports:

Cyprus is embarking on emergency efforts to restructure its second largest bank and considering new rules to stop money flooding out of the country’s banks when they reopen next week after being shut for ten days.

As eurozone finance ministers held an unscheduled conference call at which they agreed to discuss a “plan B” for Cyprus, the Nicosia government submitted a bill to its parliament that could allow its finance minister or central bank governor to impose capital controls in cases of “public order or security”.

The central bank governor Panicos Demetriades set out measures to restructure the second-largest bank, Laiki, and protect savers with deposits up to €100,000, the level of guarantee on bank savings across the EU.

“By establishing this legal framework, resolution measures will be imposed on Popular Bank (Laiki) so that it will be in a position to continue to offer banking services to its clients next Tuesday,” when banks are due to reopen, Demetriades told reporters.

Under a new plan being developed, Cyprus also appears to wants to create an “investment solidarity fund” to raise fresh cash to help fund its €17bn bailout – the same size of its economy, which is weighed down by a banking sector eight times the size of the economy and containing up to $19bn of deposits from wealthy Russians.

The European Central Bank had piled pressure on the Cyprus government earlier in the day, warning that it would halt all emergency funding to the country’s collapsing banks unless a €17bn bailout deal was agreed with Nicosia’s eurozone creditors by Monday. The threat of the ECB withdrawing support appeared to exacerbate the situation in Cyprus, where queues formed at ATMs despite government efforts to dispel what officials quickly described as “groundless rumour” about over what the rescue package would entail.

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