Cyprus banks to reopen under tight security

Security is tight in Cyprus as banks prepare to reopen nearly two weeks after closing while a controversial international bailout was negotiated.

Armed police were on guard as lorries reportedly loaded with cash arrived at the central bank on Wednesday night.

Customers face strict controls to stop a bank run and will be able to withdraw only €300 a day.

But the restrictions on the free movement of capital represent a profound breach of an EU principle, correspondents say.

Cyprus is the first eurozone member country to bring in capital controls.

As part of the bailout plan, depositors with more than €100,000 euros will see their savings taxed in exchange for bank shares as Cyprus seeks to raise €5.8 billion to qualify for a €10 billion bailout from the European Union, European Central Bank and the International Monetary Fund, the so-called troika.

An earlier plan to tax small depositors was vetoed by the Cypriot parliament last week.

In a statement issued on Wednesday, the ministry of finance insisted the measures were temporary and were needed to "safeguard the stability of the system".

It read: "The Central Bank of Cyprus and the government of Cyprus will review them each day, with a view to progressive lifting of the measures as soon as circumstances allow. "

Reuters reports that the stock exchange will remain closed on Thursday and will not reopen until after Easter.

Correspondents say some fear a stampede as banks in Cyprus reopen between noon and 18:00 local time (10:00-16:00 GMT), nearly two weeks after they closed and progressively stricter limits were placed on withdrawals at cash machines.

Armed police are on guard and hundreds of staff from the private security firm G4S will be guarding bank branches and helping to transport money.

Severe new rules have been imposed on money movements to prevent a torrent of money leaving the island and credit institutions collapsing.

As well as the €300 daily withdrawal limit, Cypriots may not cash cheques.

Payments and/or transfers outside Cyprus via debit and or credit cards are allowed up to €5,000 per person per month.

Transactions of €5,000-€200,000 will be reviewed by a specially established committee, with applications for those over €200,000 needing individual approval.

Travellers leaving the country will only be allowed to take €1,000 with them.

On Wednesday night, hundreds of protesters rallied outside the presidential palace, chanting: "I'll pay nothing; I owe nothing," the Reuters news agency reported.

Many economists predict the controls could be in place for months.

The unprecedented restrictions represent a profound breach of an important principle of the European Union that capital, as well as people and trade, should able be to move freely across internal borders, the BBC reports.

Bank of Cyprus chief executive Yiannis Kypri confirmed he had been removed as head of the bank, which is the country's largest commercial lender.

He said that he was forced to quit "upon demands of the troika", which comes after an administrator had been appointed to Bank of Cyprus to restructure the bank. It is being merged with the "good" parts of the failed Laiki Bank, which will be closed down.

But a European Commission spokesman denied that the troika had demanded Kypri's removal.

Bank of Cyprus chairman Andreas Artemis handed in his resignation on Tuesday, along with four other directors, but the bank's board rejected the resignations.

Panicos Demetriades, the central bank governor, then sacked the entire board, according to the Cyprus News Agency.

Demetriades was widely criticised on Tuesday for suggesting that Bank of Cyprus was going to be wound up in the same way as is planned for Laiki Bank.