Gold Magazine June - July 2013, Issue 27 | Page 48

economy

Nikolaos Georgikopoulos

have an ‘economic shock’
for one year and to start
from the bottom than
to take half-measures in
an attempt to soften the
blow. People need to
understand that there is
no way out of this crisis if
Cyprus does not ‘suffer’
for its past mistakes. And
the Government needs to
understand that the last
thing it should be doing
is imposing further taxes.
It should be looking to
cut unnecessary expenses but not to increase the burden on people who can’t take
any more taxes.”
In support of this argument, he notes
that in Greece, the increase in VAT to 23%
has all but killed the market. “It has to be
reduced at some point. The Government
needs to decide if it wants a high rate of
VAT which it won’t be able collect because
consumers are not paying it and traders are
not charging or declaring it so tax evasion
is on the rise. If it wants to encourage people to spend, it needs to lower VAT as soon
as possible.”
Despite high unemployment and a depressed market, Georgikopulos remains
optimistic about the Greek economy, while
acknowledging that “it has a long way to
go”. In contrast, he feels much more positive about the future of Cyprus and believes that the MoU will work:
“I am more optimistic about Cyprus and
a quick exit from the Memorandum than
I am about Greece,” he tells Gold. “The
Cypriot situation resembles the case of Ireland in that the Irish government decided
to reform its banking sector quickly and
make it work for the economy. Cyprus
is more like Ireland than Greece in this
respect. Moreover, it is more flexible than
Ireland and it has many more educated and
experienced professionals.”
He declares himself
“100% sure” that Cyprus will emerge from
the crisis much more
quickly than Greece
will. This presupposes
that the Government
will quickly implement
all the necessary structural reforms and make

I am 100% sure that
Cyprus will emerge
from this crisis
much more quickly
than Greece will
will then enter the real economy to produce more. The credit rating agencies have
begun upgrading us again, which is a sign
that things are improving.”
Figures and statistics are all very well but
so far they seem to have had little effect
on the major problem of unemployment,
especially among young people, in Greece
and – increasingly – in Cyprus too. Georgikopoulos describes it as a “crucial” aspect
of the crisis which the two governments
and their politicians have to deal with seriously and rapidly because, he says, the unemployed younger generation “cannot wait
much longer.”
“I can manage for another year on a low
salary – mine has gone down by 30% –
because I am at least receiving something,
even if it has been reduced. There are
young people in Greece who have no income of their own and their families a re in
dire straits so they will either be forced to
leave the country and look for a job abroad
or they will become a real problem.” So
far, Georgikopoulos notes, there has not
been significant social unrest in Greece and
Cyprus and he believes there is a simple
reason for this: people are expecting things
to change soon. “They are beginning to see
the light at the end of the tunnel but that
is not enough,” he says. “They want to get
close enough to be able to touch it and get
out of the tunnel once and for all.”
If there is one lesson that Cyprus can
learn from Greece, Georgikopoulos believes, it is the need to implement the MoU
with the Troika to the letter in order to
avoid another one.
“Since Cyprus has decided to sign the
agreement and to go ahead and keep Cyprus in the eurozone – a very good thing
in my opinion – it has no reason to delay
implementation,” he says. “It’s better to

46 Gold the international investment, finance & professional services magazine of cyprus

D

r Nikolaos I. Georgikopoulos is a
research fellow in financial economics and the Head of Information
Technology at the Centre of Planning
and Economic Research (KEPE) in Athens. For
the current academic year he is a visiting research Professor at the Leonard N. Stern School
of Business, New York University, where the
Society for Financial Econometrics (SoFiE), of
which he is a founder member, is based. He is
also a part-time lecturer at London Metropolitan
University, affiliated with the STORM research
centre (Statistics, Operational Research and
Mathematics). In addition, he is an external
senior associate research fellow of Professor
Nicos Christofides, Imperial College London. He
was recently the main coordinator of three research projects assigned to KEPE by the Greek
state: a) Investment Opportunities in Greece: 
The path to Recovery and Sustainable Growth
(February 2013), which was submitted to the
Prime Minister’s Office, b) The Impact of Electronic Transactions on Tax Revenues (November 2011), which was submitted to the Greek
Parliament, and c) Investment Opportunities in
Greece (September 2011) which was submitted
to the Ministry of Development, Competitiveness and Shipping .
sure that the banking system is stabilised
and put to work for the economy.
“The country’s financial system won’t be
as big as it was before but the key will be to
keep whatever works and to attract foreign
direct investment into the sectors that Cyprus knows – tourism, energy and real estate, especially the latter and the market for
holiday and retirement homes. This existed
before the crisis but not enough attention
was paid to it so the state failed to maximise the benefits, having decided that there
were other ways of making more money
and faster. In the end those ways proved to
be unsustainable. This will be a key challenge in the future but I am convinced that
Cyprus has everything required for a good
recovery and a bright future.”

There is no way out
of this crisis if Cyprus
does not ‘suffer’
for its past mistakes