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Russian roulette in Cyprus

Editorial
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I WAS deeply concerned to hear the news about the latest ‘brainwave’ for a theme park in Larnaca area, especially because of who is supposedly financing it. After having personal experience of working and living in Russia for 6 months in 2005/6, the persistent ‘brown-nosing’ of Russians for their capital now seems to have extended to the top level of government here.

I am amazed at the naivety of many Cypriots about the façade which is presented by Russians who have enormous sums of money for the simple reason that the reality of Russia and who actually wields the political and financial power there is frightening!

Concern is already being raised about the extent to which these people have infiltrated the financial affairs of the city of London and questions are now being asked increasingly more frequently, but here in Cyprus it seems that they are being encouraged, rather than controlled effectively and on a proportional basis the amount of Russian capital invested in!

Cyprus is enormous. The Presidents recent visit to Moscow, although hailed as a major success by most of the media here, did not highlight that at the same time, the Russian Defence Minister was in Ankara, concluding a billion dollar deal with Turkey, nor was much said about why Putin, still the most powerful person in Russia, shunned Christofias after he held a two hour meeting with Zhuganov, the now unimportant and much derided Communist party chief??? No doubt his Russian hosts were squirming too when the president started reminiscing with nostalgia at a press conference about his student days there under the Soviet regime, which was a total failure and collapsed from within, as all the world knows!

My wife is originally from Famagusta and we returned here in 1979 believing that we would soon be able to return home, but nearly 30 years later we are still waiting, perhaps in vain that something just might finally happen in that direction?

I would add that I have nothing against ordinary Russian people and have some very close friends there but at the same time I do not welcome cohorting with the elite from there, many of whom are no more than sophisticated swindlers and even downright criminals!

So much for the two page report in the latest Cyprus Weekly on the latest annual Cyprus-Russian business forum which tries to promote Russia as an excellent place to do business…..of course things like the massive endemic corruption, gagging of the media by the authoritarian regime, murder of journalists and human rights campaigners there and lack of a civil society were not give any attention I suppose? The Greek-Cypriots lambast the world ad nauseam with their constant moaning about Turkey violating their rights in Cyprus etc, etc. So forgive me if I think this is a little hypocritical, especially when they have joined the E.U. etc and should be looking towards Europe, not kow-towing to Russia?

As my best friend in Moscow told me earlier today, people there are losing their jobs continually, just as in many other developed countries due to the recession and if the Greek-Cypriots think the Russians will save their tourist industry, or their economy, they are living in cuckoo land!

Anyone can go to Google videos for example and freely watch excellent documentaries such as ‘Railway of Bones’ and ‘Disbelief-Russia 1999’. I wonder what the Cypriots would then have to say afterwards?

Kind regards,

Mr S
Famagusta

Cyprus banks under stronger liquidity pressures

Editorial
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THE liquidity pressures that the banks in Cyprus face have become stronger and stronger lately; according to latest Central Bank data, they continue to lose deposits and increase their loan portfolios. In December, the banks granted loans of 549 million euro, a quite small amount compared to other months but they lost deposits of 683 million euro.

According to the Central Bank of Cyprus, the total deposits in the system fell from €56.7 billion in November to €56 billion in December 2008. On the other hand and despite the cautiousness in the allocation of new loans, the lending balances reached €54.7 billion at the end of the year against €54.2 billion in November 2008.

The loans granted by the banks were frantic in 2008. On an annual basis, loan growth reached 33%, while deposits grew by 7%. In the last year, banks increased their lending portfolios by €13.7 billion, while their deposits grew by €3.5 million. This means that they lent €4 for every €1 they received in deposits.

The Q4 data are exceptionally interesting since they concern the critical period after the last phase of the financial crisis. The banks allocated loans of €2.8 billion and lost deposits of €0.5 billion. The deposits have been lost due to the outflow of accounts of both Cypriots and non-Cypriots including the Russians.

In early 2008, the banks had €10.1 billion more deposits than loans. Today, the depository “surplus” fell to €1.3 billion. It is worth noting that a significant part of deposits must be maintained for precautionary purposes.

© 1999 – 2009 Stockwatch Ltd.

Under the mattress is just not safe enough!

Hermes Solomon
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THE PHRASES ‘toxic debt’ and ‘quantitative easing’ are now fashionable. What do they mean? The former means quarantining irredeemable bank debt to give banks breathing space so they can start lending again, and the latter means printing as much money as is needed to regenerate that lending. Hyperinflation or increased taxes to pay for it will be the outcome. Whichever of the two, we will become poorer. Our savings will be worth less… or worthless.

The question must be asked by savers and answered by our Finance Minister given the state of world banks and depositors’ increasing concerns over the safety of their savings: What percentage of saver’s deposits are protected by the Central Bank of Cyprus?

At the last reckoning I was told by the assistant manager of my Bank of Cyprus branch that deposit protection amounts to €34,000 per named account holder; in other words, if an account is held under two names, a total of €68,000 is guaranteed.

However, prior to the Christmas recess of the House of Representatives, a bill protecting €100,000 per named depositor was posed. This bill was not passed nor has it been mentioned since. Why not? Mr Charilaos Stavrakis instead pumped €700 million of government funds into our banks to avoid liquidity problems. This action in itself suggests our banks are in trouble.

While our government pontificates about the worsening economic climate (GDP is now expected to fall this year to one per cent instead of the 4.2 per cent predicted by Stavrakis last October) the island’s economy sinks. At this rate of fall we should be well into drowning by the summer.

We are a small island with a tiny economy that is reliant on tourism, banking and the construction industries, all expected to struggle for the foreseeable future.

Until the leviathan US economy is back on track, and we don’t expect it to be overnight, Cyprus must make provisions for the worst possible scenario, which is now looking increasingly like an economic slump as bad, if not worse by comparison to the 1930s, when banks closed their doors until the great President Roosevelt regained the confidence of savers. Banks cannot survive for long without savers, something we’ve ignored this past 20 years.

A securitising of saver’s deposits in the region of €100,000 per named depositor is of paramount importance if we wish to avoid a run on our banks. It is a Finance Minister’s duty to protect the savings of depositors. By not doing so he is encouraging a run.

I cannot trust a Minister who gets GDP growth rates so hopelessly wrong. Several Cypriot banks are tied into Greek banking and its economy. Greece, Spain, Estonia, Hungary and Ireland are already bankrupt and seeking support from the ECB. How long will it be before we join them?

It is time for positive action on his and our government’s behalf. Talking us out of a recession is just not good enough. We need action not words. We need a serious programme of public works and investment in alternative energy, schools, roads, hospitals and financial support of our agriculture and light industry. The Greek god Helios shines on us almost every day yet we stubbornly refuse his help. We are still blinded by easy and greasy oil, which is leading us down into an economic Inferno. We need what Barack Obama has promised his people. One-three-hundredth of it would suffice.

If our government dallies for too long our unemployment rate will rise to 10 per cent or more and not the five predicted. We are vulnerable because we rely on outsiders for our bread. And their numbers are dwindling fast. When the foundations are removed from a house it comes crashing down, and not slowly as Mr Stavrakis is suggesting, but suddenly and totally, causing mayhem and many casualties in its wake.

Economics it said to be an imprecise science. Given this past year of stock market turmoil, precision is now the order of the day. Who hasn’t had enough of these talks purportedly in search of reunification when neither side seeks anything of the kind? Who wouldn’t prefer to see our government taking firm action to withstand the worst effects of this mega recession? Government is meant to govern. It’s time we concentrated our efforts on our future economy and little else. If we don’t, they’ll be nothing left worth governing or reunifying.

The Russian rouble and pound sterling have crashed. The euro will come under fire soon. Everybody is buying gold. I am looking at fitting a wall safe. Under the mattress is just not safe enough.

Perhaps I should invest my gold cross and chain in alternative energy. At a $1,000 dollars an ounce I’ll own one half of one share… Hmmm? I’d better have a word with my wife and see if I can get her to part with her gold bracelet.

Copyright © Cyprus Mail 2009

Cyprus Housing Finance Corporation hit by global crisis

Jacqueline Theodoulou
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THE CYPRUS HOUSING Finance Corporation (HFC) has asked the Finance Minister to inform him on his plans to deal with the difficulties in the Cyprus banking system.

The HFC is especially worried about what the government plans to do, especially since state funding towards banks was stopped and interest rates have increased due to the international financial crisis, it said yesterday.

Presenting the HFC 2009 budget yesterday, the Chairman of the organisation’s Board of Directors Christos Loizides informed the House Finance Committee that HFC income for 2009 was estimated at €15.75 million compared to the previous year, when it was €16.74 million.

Furthermore, expenditures are expected to reach €8.89 million compared to 2008’s €8.49 million.

The organisation’s surplus is also expected to decrease to €6.85 million compared to the previous year’s €8.24 million.

Loizides said the reduction in income was due to lower revenue from interest compared to last year.

In 2008, the HFC brought in €14.09 million from interest compared to the €12.94 million expected this year.

“The difficulties have arisen because due to the international financial crisis and the consequential increase in interest rates, in tandem with acute competition among banks, the Housing Finance Corporation has been forced to offer high interest rates to its depositors, while maintaining the lowest possible interest rates for loans,” Loizides said.

He added that being aware of its social role, the HFC was offering its depositors up to 7.0 per cent interest, while for loans, it was charging up to 5.75 per cent.

Loizides called for an urgent meeting with Finance Minister Charilaos Stavrakis to be informed on what the government was prepared to do to help the Corporation.

Copyright © Cyprus Mail 2009

Editors Comment

Any organisation that offers depositors 7.0% interest while charging borrowers 5.75% is highly likely to end up in a very precarious situation!

Thousands of Cyprus property workers face job losses

Bejay Browne
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AS MANY as 3,000 construction workers in Paphos could lose their jobs in the coming months if there is no turnaround in the real-estate slump, a survey of companies in the area has found.

The survey was carried out by ACMA Consultants on behalf of the Paphos Building Contractors Association. It found that out of the 100 companies polled, 95 said they would be laying people off in the next few months if the economic situation did not improve.

There are a total of 280 such companies registered in Paphos, and the Association has 120 as members.

Antonis Petrides, the president of the association said the results of the survey were “startling”.

“Over the next three months you will see a huge increase in the number of unemployed in Paphos. After April we are really going to see the full force of the problem,” he said. “Paphos was where the developing boom took place, and we have thousands of workers living and working here, in all aspects connected with this sector.”

ACMA asked the 100 firms who took part if they had already felt the negative effects of the financial crisis. Around 20 had not but 80 said they had.

“We then asked if they thought the financial crisis would affect them in the next six months,” ACMA’s Christos Marcou said, “One hundred per cent said yes.”

The participants were asked if they felt they would have to lay people off. Only 13 of the companies said they were not willing to. The remaining 87 said they would probably have to lay off staff, while 26 of those said they already had.

According to Marcou the layoffs totalled 951.

The next round of layoffs would likely be subcontractors, Marcou said. Out of the 100 companies polled, 95 used subcontractors for woodframe makers, piping and steel work.

“We asked if the crisis continues would they fire these workers. Ninety five per cent said yes and twenty nine per cent of those are doing so now,” he said.

The remainder said they would have to lay off subcontractors over the next six months.

The total number of sub contractors facing unemployment is 1,577.

“If you add these figures together, this means 2,528 people working in the building industry in Paphos, losing their jobs over the next few months,” Marcou said.

He said personally he thought the international crisis was a disaster for Cyprus.

“There will be a panic if action isn’t taken now,” he added.

“British people want to move back to the UK because property prices are lower there. Here, there are no sales of new projects and there is no money to purchase re-sales. In addition, the banks have frozen loans. It’s terrible.”

Petrides said the association had passed on the results of the study to the government, and asked them to give Paphos more funding to start more developments. These included roads and schools.

“Many people have given their promise to help us, including the Mayor, Savvas Vergas, but as yet we haven’t seen the results. The local government is reliant on central government, and they have their own rhythm of doing things. It’s very slow,” he said.

“The local council can say they will speed up their projects. The will may be there, but they have to wait for decisions from the government.”

Petrides said that workers in Paphos fall into three categories. The first consisted of Cypriots and Europeans, who work and contribute to the social insurance fund.

The second were people who live there legally but who don’t make any social insurance payments. And the final section consisted of illegal immigrants.

“We have many illegal immigrants here,” said Petrides. “The government and the police must crack down…on those working illegally. Some are in the building sector. They must be deported. We have to minimise the impact on the legal workers, and I believe this is the first step.”

Paphos labour office has also seen a huge increase in clients over the last two months, an employee there told the Sunday Mail.

“It’s so busy here now. It’s usually busier during the winter months as a lot of people are seasonal workers. But this year is different. There are many people out of work, and these are from all sectors. I think the crisis has started already, but I’m sure this is only the beginning,” said the employee, who wished to remain anonymous.

“The social insurance car park is full and overflowing on a daily basis, with cars queuing for spaces every morning.”

The employee said most of the people who were turning up worked on building construction sites, hotels and the services sector. Around 60 per cent were construction workers. Hotel workers comprised the next biggest percentage.

Most of the unemployed were Pontian, Georgian and Russian, with Cypriots and other EU nationals from Bulgaria, Romania and Eastern Europe making up the rest.

“The problem is, people said when the building boom finished these foreign nationals would go home. But this isn’t the case. For example the Pontians and Georgians now have a community here and they can get social benefits. They aren’t going to leave Cyprus,” said the employee.

“We can’t just employ people here and use them, dumping them in a crisis. I know we have to look after Cypriots, but I think if someone is here legally and has worked and paid social insurance, they should be treated just as the locals. We’re European now.”

Copyright © Cyprus Mail 2009

Cyprus property sales down 50 per cent

Editorial
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PETER Paradisos, the marketing manager for Maispa Developers said property prices in Cyprus were falling steeply even though he didn’t have any official figures as yet.

“I would say enquires and sales are down by 50 per cent. If you’re a good salesman you can close a deal on most enquiries, but if they aren’t coming in that’s a big problem. It’s not just us. Everyone is experiencing the same problem in Paphos.”

Paradisos said they would not be able to replace the British market, but might be able to minimise the negative impact.

“The British will come back but it will take until 2010 before we see this happening,” he said.

“They just don’t have the money at present to make purchases.”

Maispa is taking three main measures toward minimising losses during the current climate.

Paradisos said the company was looking at alternatives such as Russia, Dubai and other Arab counties.

Interestingly, he also said there was some movement from Cypriot buyers. “Interest from this sector is higher than usual. I think this is because there are bargains to be had in the re-sale sector,” said Paradisos.

He said many Britons were leaving Cyprus because of low income or the inability to secure work.

“People can’t afford to live here now, there aren’t enough jobs, the market is depressed in that respect,” he said, adding that pensioners were also being hit hard because of the poor exchange rate from sterling to the euro.

“Every day I hear of large companies building a project up to a certain point, and then stopping and waiting for a sale. This minimises outgoings,” Paradisos said.

“We used to sell off plan, but now we’re saying, purchase today and completion will be in’ x’ amount of time. We’re trying to get the money in to keep things moving.”

Paradisos agrees with the general view that April would be a tough month for everyone.

“We won’t be an exception. Things are moving very slowly, and even the re-sale market is down by 20 per cent compared with last year,” he added.

“Things will get better and the British buyers will come back. It will just take time for everything to settle down and we have to weather the storm.”

Copyright © Cyprus Mail 2009

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