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Cyprus reopens banks after nearly two-week lockdown

Police are seen outside a closed branch of Laiki bank in the old part of the Cypriot capital Nicosia on March 28, 2013
Police are seen outside a closed branch of Laiki bank in the old part of the Cypriot capital Nicosia on March 28, 2013. Banks in Cyprus reopened under armed guard on Thursday after a nearly two-week lockdown but customers faced harsh curbs to stop them dr

Banks in Cyprus reopened under armed guard on Thursday after a nearly two-week lockdown but customers faced harsh curbs to stop them draining the island's coffers after its eurozone bailout.

Queues of dozens of people formed before the doors swung open at 12:00pm (1000 GMT) for the first time since March 16, and there were tensions as a few branches opened late, with customers banging on the doors.

World markets were jittery over the crisis, which has seen capital controls imposed for the first time by a eurozone economy in order to prevent financial meltdown after the 10-billion-euro ($13-billion) EU-IMF rescue package.

"It will be a very bad day -- there will be swearing and a lot of anger," Philippos Philippou, an unemployed electrician told AFP outside Laiki bank in in Nicosia's Makarios Street where about 12 people were lined up.

Graphic explaining measures Cyprus will take to receive EU bailout
Graphic explaining measures Cyprus will take to receive EU bailout.

Banks were handing out lists of the controls including a daily withdrawal limit of 300 euros ($385), imposed to prevent a run on the banks that could wreak havoc on the east Mediterranean island's already fragile economy.

Five shipping containers reportedly filled with billions of euros were delivered to the central bank late Wednesday, an AFP photographer said. A helicopter and police cars accompanied the cash convoy.

The Cyprus stock exchange remained closed.

Most banks in Nicosia had between one and three guards posted at their entrances early morning, some of them carrying weapons -- an alien sight in the generally peaceful tourist island.

There were queues of up to 25 people at other banks.

Cypriot authorities appealed on television late Wednesday for people to give priority to the elderly as many do not have credit cards and have to withdraw their money over the counter.

Roula Spyrou, 50, a jewellery shop owner, said she would not bother going. "There's going to be queues so I'm not going to spend so many hours there to get 300 euros," she said.

Demonstrators protest outside the European Union House in the Cypriot capital Nicosia on March 27, 2013
Demonstrators protest outside the European Union House in the Cypriot capital Nicosia on March 27, 2013.

The restrictions -- which last for a week before they are reviewed -- also ban the cashing of cheques and ordered those travelling abroad not to take more than 1,000 euros out of the country.

Under a deal agreed in Brussels on Monday, Cyprus must raise 5.8 billion euros to qualify for the full 10-billion-euro loan from the "troika" of the European Union, European Central Bank and International Monetary Fund.

Depositors with more than 100,000 euros in the top two banks -- Bank of Cyprus (BoC) and Laiki or 'Popular Bank' -- face losing a large chunk of their money.

Banking employees union ETYK said staff were ready to go back to work but urged the public not to blame them for the tight controls. Unlike in other European countries Cypriot tellers are not housed behind glass barriers.

Demonstrators wave flags and chant slogans as they protest infront of Presidential Palace in Nicosia on March 27, 2013
Demonstrators wave flags and chant slogans as they protest infront of Presidential Palace in the Cypriot capital Nicosia on March 27, 2013.

Monday's deal kept the Mediterranean island from crashing out of the euro -- but it has provoked fury at home.

Finance Minister Michalis Sarris said on Wednesday that Cyprus "will see worse days in 2013... the economy will go into deeper recession."

On Wednesday, around 1,500 anti-austerity protesters marched on the presidential palace.

Bank workers could be among the worst hit by the bailout as it demands major reforms to its banking system, which is heavily dependent on Russian money.

The bailout involves restructuring the Bank of Cyprus and eventually winding down Laiki, whose "good" assets will be absorbed by the bigger bank. BoC's chief executive was sacked on Wednesday.

Cyprus is the first eurozone country to impose capital controls after bailouts -- unlike Greece, Spain, Portugal and Ireland, which have also received multi-billion-dollar rescue packages.

As well as raising concerns that other countries could face similarly harsh bailouts in future, the move has raised fears that it could effectively create "two euros" as euros trapped in Cyprus are effectively worth less.

But the European Commission said on Thursday there was "a matter of overriding public interest" in imposing the controls to maintain the stability of the financial system and of Cypriot banks.

Asian markets mostly fell Thursday and the euro sat around four-month dollar lows as eurozone fears reared again over Cyprus and also as Italy's politicians remain unable to form a government weeks after an election.

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