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Customers and media representatives wait outside a branch of the Bank of Cyprus, in Nicosia, Cyprus, 28 March 2013 morning. Photo by EPA/BGNES
The European Commission has justified the introduction of unprecedented restrictions on capital in Cyprus, even though they are widely seen as a profound breach of an EU principle.
"The temporary restrictions on the free movement of capital are part of a series of measures to prevent the significant risk of uncontrollable outflow of deposits which would lead to the collapse of the credit institutions and to the immediate risk of complete destabilization of the financial system of Cyprus," the European Commission said in an official statement on Thursday.
According to the European Commission "Member States may introduce restrictions on capital movement, including capital controls, in certain circumstances and under strict conditions on grounds of public policy or public security."
"Such exception to the principle of the free movement of capital must be interpreted very strictly and be non-discriminatory, suitable, proportionate and applied for the shortest possible period."
"In current circumstances, the stability of financial markets and the banking system in Cyprus constitutes a matter of overriding public interest and public policy justifying the imposition of temporary restrictions on capital movements."
However the European Commission added that "the free movement of capital should be reinstated as soon as possible in the interests of the Cypriot economy and the European Union's single market as a whole."
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