CYPRUS
BYJENNY ELLINAS
Forging Ahead
With prosperity in Cyprus
A
·
Setting the scene to the bail-in
So what went wrong? In 2010 the IMF and EU
announced they would assist Greece and other EU
countries in respect of financial collapse/difficulties;
and despite its small size, Cyprus stood by its EU
fter reeling from the harsh “ bail-in”
requirements imposed by the Troika (the
IMF, EU and ECB) in March this year;
the truth is that Cyprus has already dusted itself off
and is focusing on all of the existing elements that
make it so appealling on so many levels; as well as
new prospects.
On 01 January 2008 Cyprus adopted the Euro
after coming off the very strong Cypriot Pound (on
31.12.2007 it was R19,92 to CY£1 !), the economy was
flourishing and it was the peak of Cyprus’ property
boom. It took a couple of months’ lag after the USA
Lehman Brothers investment bank’s bankruptcy
on 15 September 2008 for the effects of the global
economic decline to hit the island.
But where they were fortunate is that the Cypriots had
– and continue to have – a very high GDP per capita
(in 2009 the IMF ranked them 30th at $29,427 p/p).
In 2009, the island enjoyed income from many diverse
industries:
· Ship management and registrations - the largest
in the world
· Financial services - lowest corporate tax rates in
Europe (then capped at 10%)
www.reimag.co.za
Tourism: 2.4million tourists; actual revenue
€1,8 billion
Exports: pharmaceuticals, wines, fruit and
vegetables. €1.53 billion.
partners in 2011 to bail these countries out. All EU
countries were forced to take a haircut on Greek
private sector debt; as well as to assist in the bailout
of other European countries. Two of Cyprus’ largest
banks (Laiki Bank and Bank of Cyprus) were the
highest exposed and gave away almost €5bn in Greek
Government Bonds in an EU-led effort to restructure
the Greek national debt. This of course had direct
knock-on effects last year as both banks were then
themselves faced with financial difficulties which
affected the normal financial arrangements of the
Cypriot government. The government was forced to
request a loan from Europe until its natural gas and
oil reserves are realised in the next two to four years.
W here we are now? The Troika responded
positively – although harshly! – and in March agreed
to a ‘bail-in’ which included lending Cyprus €10bn
Offshore Handbook 2013
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