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Cyprus Economy: A Vicious Circle – A Recipe for Drowning?

In our previous articles and apart from God, whom we call upon from time to time to help our economy, we come up with the new approach of needing a magician (and we quoted Houdini as an example) to help us out.

It is beyond us how we are going to get out from all this mess. Our worst affect on the economy was the confiscation of the deposits, an unprecedented measure which did not happen to any other distressed E.U. country, such as Spain, Greece, Portugal etc. Quite “logically”!!! the E.U. decided to have an experiment on a small country with no means of reaction and suddenly people with savings for their future and/or cash to be used as part of their business, were found at best with the €100.000 guaranteed (whatever this means) deposits.

So, now people have lost much of their cash, their income in terms of private employees have their income (if they are lucky enough not to lose the job) by around 30% (God forbid for the civil servants who had a reduction of maximum of 20%), but yet the top income/salary people are those who are complaining. We quote the Cyprus Airways pilots and the air controllers who have an income of anything from €100.000-€150.000 p.a. and having no inhibition to complain and even take legal action.

We are now having the problems of restructuring loans. On the one hand the banks need desperately cash to improve their capitalization, people/Cos have no cash (the confiscation and the much reduced business apart) holding in some cases back the payment of loans in order, at best, to cover their ongoing running/overhead expenses and the banks coming back with memos blocking transfers to those fortunate enough to have titles, the income tax/property tax people increasing the property taxation by 3 times and local authorities in their desperation from their reduced Governmental subsidy, are making life for real estate owners and others even worse. Yet we read in the press of some real estate Cos announcing new large scale projects, the new agreement between the Government and the SBA to increase development land by even more, plus the new agricultural policy of allowing development projects in agricultural areas for large projects. All these are well and good, but who on earth will buy all these developments to be, when in addition to the existing vacant development land and unsold properties, there are approximately 500.000 sq.mts. of golf developments to be, plus over 200.000 sq.mts. from the marinas to be, plus the SBA “new” area and again plus the thousand of sq.m. introduced under the new agricultural policy?

So at the end of the day we will have more than 2.000.000 sq.mts. of developments and with reducing business – pushing local property values at an even lower level. In its effort the Government in order to attract new investors, is offering new relaxations causing damage to those development projects/areas already existing, let alone who will finance those projects and their buyers – “Chinese is the answer” we are told. But does this mean, if and when the Chinese market comes up to take up the supply – Cyprus be a new Chinese town? If one reads the disaster of Titanic history one of those who have jumped the boat and was crying for help a nearby lifeboat throw him a lifejacket which landed on his head, he fainted and drowned. We study, as perhaps, the oldest and most diversified (in our opinion) of real estate consulting firm in the island, having a group of people with brain storming ideas how to help out, but we cannot come up with some sort of a solid and workable idea, hence our referee to the gone magician Mr Houdini.

A depressing article we must say but we want to air any views to you, dear readers, since being part of the establishment, there are no angles to the situation/solution that we can come up with. Let alone the standard of our MPs and political parties who are not up to its of the whole situation.

We do apologize for this article and we will come up, we hope, with a more positive note, in the immediate future, seeing that Easter is coming up we hope that we will come up with “something” positive since we will need a little encouragement for the better future.