Cypriot businesses feel liquidity pinch For anyone who doubted how Cyprus's banking crisis would strangle local small and medium businesses, the reality hit home on Thursday when the country's banks reopened after being closed for almost two weeks. Konstantin Miltiadou, a shoe importer, was desperate to pay his company's bills but after 20 minutes at his local Laiki branch he was turned away empty-handed, despite having all the proper documentation with him. Calm on entering, he was fuming when he left. "I have the money in my account but they don't want to give it to me!" he exclaimed. I want to pay my telephone bill, I want to pay my taxes. How can I pay? Another local businessman, Michael Andreou, needed €20,000 to pay his suppliers and even more to pay his employees, but said that he was not sure if he would secure the special dispensation required to transfer the funds. "There are crates of children's toys in China just waiting to be shipped to us when the money goes," said Mr Andreou. I need to get about €20,000 from the bank to pay my suppliers. Capital controls imposed on Thursday to prevent a financial sector meltdown mean that residents can only withdraw a maximum of €300 in cash per day from each bank where they hold an account and local businesses will have to limit transactions to a maximum of €5,000 a day. More than 95 per cent of businesses in Cyprus have fewer than 10 employees, according to economists. Smaller groups are less likely to have large reserves of cash and are therefore most vulnerable to a liquidity crisis on the back of the capital controls. "The capital controls are going to hit local business very hard," said Fiona Mullen, director of Sapienta Economics, a consulting firm based in Nicosia. You will have a de-facto barter economy for a lot of transactions, because there is so little real cash. She predicts that the Cypriot economy will shrink by about 15 per cent this year, as the island's banking sector is hit hard by the terms of a €10bn EU bailout, which will see many depositors at the two largest banks Laiki and Bank of Cyprus face large losses. In a tense day on the island on Thursday, with nervous queues forming outside many local banks, the streets were buzzing with stories about cash flow problems for ordinary people. One man was apparently forced to close his electrical shop in Larnaca, in the south of Cyprus, because his suppliers would only accept cash and he did not have enough. Highlighting the level of the problems, electricity companies have said that they are cutting bills from next week to help local businesses cope while the country's telecommunications authority, CyTA, said it has postponed disconnecting customers who have not paid their bills. The three largest bakeries in Cyprus - Zorbas, Pandora and Marangos - have also announced special offers on basics such as bread and milk, cutting prices by more than 80 per cent. "Witnessing what's happening and the cash flow problem many people are experiencing, we thought it necessary to offer the basics cheaper," a Zorbas representative told local press.