Cyprus confirms gold sale an option in bailout, eases controls

NICOSIA Thu Apr 11, 2013 9:54pm BST

A customer leaves a Eurobank branch in Athens April 10, 2013. REUTERS/John Kolesidis

A customer leaves a Eurobank branch in Athens April 10, 2013.

Credit: Reuters/John Kolesidis

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NICOSIA (Reuters) - Cyprus said on Thursday a sale of its gold reserves was among the options for its contribution towards an international bailout, but ultimate responsibility rested with its central bank.

The Mediterranean nation, which is in line to receive 10 billion euros (8.4 billion pounds) in aid, also partly eased capital controls imposed last month to prevent a bank run as it tries to boost business activity in its ailing economy.

Cyprus has to sell some of its gold reserves to raise about 400 million euros to finance its part of the bailout, an assessment of Cypriot financing needs prepared by the European Commission showed.

The document, seen by Reuters on Wednesday, said there had been a commitment from Cypriot authorities to this effect.

"The Cypriot government put various options forward, including this," government spokesman Christos Stylianides told a news briefing on Thursday.

"In its consultations on drafting the memorandum of understanding the Cypriot government included such options so we could have the possibility of meeting financing requirements," he said, adding that the gold sale was "one of many" options.

Earlier a central bank spokeswoman said the sale of gold reserves had to be approved by the board of the central bank, and it was not presently on the board's agenda.

Gold on Thursday fell to its lowest since April 5 at $1,553.10 an ounce and was at $1,557.51 by 1:44 p.m. British time, broadly unchanged on the day. On Wednesday gold had posted its biggest one-day fall since February 20, accelerating losses after news of the Cyprus gold sale plan.

The document said Cypriot authorities were "committed" to sell excess amounts of gold reserves. Cyprus's central bank February accounts showed the island had gold reserves worth 563.4 million euros.

The tough terms of Cyprus's bailout deal, which forces depositors with more than 100,000 euros in savings to bear part of the cost of the rescue, look set to deepen the island's recession, shrink its banking sector and lead to thousands of job losses.

Cyprus's status as a financial hub has all but crumbled after authorities were forced to split up one bank and slap heavy losses on depositors in a second in return for the aid.

Banks on the island remained shut for nearly two weeks and reopened under tight restrictions on March 28 to prevent a run on deposits from panicked savers.

The capital controls - a first for the euro zone - may test the ties that bind the single-currency bloc as a whole. Officials have said the restrictions will be lifted gradually.

With a decree published by the finance ministry on Thursday, Cyprus has allowed bank transactions of up to 300,000 euros domestically and raised the threshold for company payments abroad to 20,000 euros from 5,000 euros without prior vetting.

It has also permitted travellers to take 2,000 euros abroad from 1,000 previously. However other restrictions, such as a cash withdrawal limit of 300 euros per day, remained in place.

(Reporting by Michele Kambas and Karolina Tagaris; Editing by Michael Roddy)

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