When you say “capital controls” to people on the street, they usually have no idea what you mean.
When you say “capital controls” to economists, they usually have no idea what you mean either. I know I don’t until the specifics come out.
Typically though, these mean any sort of legal measures that politicians can dream up, that they have hopes of enforcing, with the intention of slowing down the movement of money out of a country. In this case:
• Restrictions in daily withdrawals
• Ban on premature termination of time savings deposits
• Compulsory renewal of all time savings deposits upon maturity
• Conversion of current accounts to time deposits
• Ban or restrictions on non cash transactions
• Restrictions on use of debit, credit or prepaid debit cards
• Ban or restriction on cashing in cheques
• Restrictions on domestic interbank transfers or transfers within the same bank
• Restrictions on the interactions/transactions of the public with credit institutions
• Restrictions on movements of capital, payments, transfers
• Any other measure which the Finance Minister or the Governor of Cyprus Central Bank see necessary for reasons of public order and safety
To summarize, starting in the middle: without checks or debit cards, your checking account is now a savings account from which you can make limited daily withdrawals, your savings accounts is now a CD, your existing short-term CDs will be automatically rolled over into long-term CDs, and you can’t cash them out early.
This is my opinion, but I don’t believe capital controls this aggressive have ever been used in a developed and/or European country in the last 50 years.
Also, make no mistake: this is like creating a second-class Euro just for Cyprus — basically it’s scrip. So much for a single currency. And check this out:
Cyprus is odds-on favourite with bookmakers William Hill to be the first country to leave the euro. Having been a 20/1 shot to do so a week ago, Cyprus is now 1/2 favourite, displacing former odds-on favourite Greece, whose odds have now gone out to 7/4.