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EUROPE NEWS

• March 21, 2013, 8:57 p.m. ET

As Cypriots' Confidence Wavers, Cash Is King

Businesses Grow Wary of Accepting Checks or Credit and Waits Grow at the ATM; 'What's Going to Happen Tomorrow?'

By JAMES ANGELOS

NICOSIA, Cyprus—At a busy filling station in the center of this Mediterranean island nation's capital, Andreas Yianni, the owner, has a pressing request for customers queuing to fuel up: Cash, please.

To keep his business running, Mr. Yianni had to pay €22,000 ($28,000) up front—about a third of it in cash—to secure a delivery of gasoline on Wednesday. Now he needs to bring in enough cash so he can restock.

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Reuters

A protester, center, argues with police standing guard at the Parliament during a protest by employees of Laiki Bank in Nicosia on Thursday.

As Cyprus ended its sixth day without open banks on Thursday, the economy was on a crash cash-based diet, with people's purchasing power increasingly limited to the amounts they are able to withdraw daily from ATMs.

Businesses have largely stopped accepting checks and doubts are mounting about debit- and credit-card payments connected to accounts in troubled banks amid uncertainty about the future of the country's tottering financial system, as politicians try to negotiate a new bailout deal with the European Union.

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The ECB ramped up pressure on Cyprus to seal a bailout pact with the EU and the IMF by Monday, making further funding for the island's ailing banks contingent on a deal. Christopher Lawton reports.

"What's going to happen tomorrow?" asked Mr. Yianni. "Europe has to help us."

Cyprus's Parliament on Tuesday rejected a rescue plan from the EU and International Monetary Fund that called for a tax on bank deposits.

The European Central Bank has threatened to withdraw support if there isn't a new agreement by Monday.

In the meantime, ordinary Cypriots are putting off buying nonessentials and lining up at cash machines to get what money they can.

"We're here because tomorrow, there may not be anything to withdraw," Giorgos Kyriakides, the owner of a cosmetics import company, said as he waited in line at a Laiki Bank ATM on Thursday morning.

Shops and small businesses for the most part remained open, but proprietors were adjusting their operations as transactions shifted to all cash, and many said they have had to scale back on new supplies.

Kyriacos Papayiannis, the owner of a family-run supermarket, said he is ordering less of some goods in order to conserve cash. On Thursday, he paid €400 in cash for a delivery of baby formula—far less than he ordinarily buys.

When an elderly woman entered Mr. Papayiannis's office to ask if he would accept a Laiki Bank check for €170 to buy some groceries and get some cash back, he answered quickly.

"It's not even conceivable," Mr. Papayiannis told the woman, who left without making a purchase.

Restaurant and kiosk owner Sakis Siakopoulos said he has resorted to barter in order to meet his obligations. A supplier of meats from Greece, he said, agreed to accept a shipment of Cypriot Halloumi cheese instead of a bank transfer.

"If I give you a check, who knows if tomorrow I still exist and I'm not bankrupt," Mr. Siakopoulos said, before running to his kiosk to pay a tobacco supplier €550—in cash, of course.

As fears grew that businesses would stop accepting credit and debit cards, many rushed to ATMs Thursday evening to withdraw as much cash as they could.

Petros Prokopiou, a 34-year-old civil engineer and the father of two young children, took €500 out of a Laiki Bank machine, saying he was worried his card would no longer be accepted by businesses in the morning.

While his family had been able to manage without much change to their routine until now, he said, their anxiety over the future grows each day.

"Tomorrow, we could have a problem," he said. "If no one takes my card, I must have cash."

A version of this article appeared March 22, 2013, on page A10 in the U.S. edition of The Wall Street Journal, with the headline: As Cypriots' Confidence Wavers, Cash Is King.

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