Citizens and businesses in Cyprus resorting to barter as bank freeze continues

20/03/2013 23:31

After four days into a national bank holiday in Cyprus, the need for cash in business transactions has become so tight, that on March 20, it is being reported that retailers and customers are resorting to barter as their inability to access cash and credit has almost completely frozen the nation's economic system.

Bloomberg Onsite Reporter: Well there is definitely a cash crunch, and I'll give you one example. I've been hoarding my cash, and for the first time today, I busted it out to buy some sandwiches at a sandwich shop. I gave the guy 20 euros, and he gave me back 15 (euros)... and he didn't have any change, so he gave me two Kit-Kat bars. - Bloomberg

The country of Cyprus has been under a bank holiday, and complete freezing of customer assets since Saturday, with the government reporting that banks will not be re-opening until at least next Tuesday, some six days away. This means the liquidity crisis for citizens and businesses will only get worse, with the potential for runs on merchandise, expanded barter, and black market selling increasing each day the flow of money remains halted.

Additionally, the government of Cyprus is installing massive capital controls on customer accounts, as the expectation of a bank run is high once the banks re-open at a later date. Confidence in the banking system, especially after Cyprus officials attempted to impose a wealth tax on people's savings accounts three days ago, is preparing many to see this as a rehearsal for worsening circumstances all across the European Union.

In today's electronic and global monetary systems, trust and reliance upon banks, and the money they channel, is very delicate, and highly illiquid as most institutions rely upon digital currencies more than they do paper ones. And for the people of Cyprus, their inability to use digital bank cards to perform necessary transactions is quickly forcing citizens and businesses alike to resort to barter when the medium of money is no longer available.

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