The big news this week was the issue over Cyprus’ plan to impose a levy of up to 10% on Cypriot savers in order to save the country from bankruptcy. Cypriot President Nicos Anastasiades, in the job just 3 weeks, said “The island had to accept a painful compromise or face bankruptcy.” It’s not often your hear an elected official admit to that.
However,later on in the week this was voted against when protests from the public and large Russian investors threatened to move their cash off of the island in the chaos.
Cypriot Corruption
Widespread corruption in government, which has always been part of Cypriot life, finally came home to roost. I have written many times here, and on forums about Cyprus and why it was, and still is, a bad place to invest or own property. I say this from a standpoint of experience having lived, worked and owned property in Cyprus. Over the last 25 years we owned a property in Cyprus, I saw huge changes in the island. One constant though was that if you want to get anything done that required a legal document, you would have to grease the palm of several government officials along the way.
In Cyprus, it was always about who you knew that was high enough up the food chain. This was a fact of doing business. Cypriot governments did not care where the money came from, just that it came, and that they got a cut for doing ‘business’. Cyprus has long been classed as a ‘tax haven’ which encouraged the deposit of funds, no questions asked.
Tough Times For Investors
Many ordinary folks have found out the hard way that much Cypriot land did not belong to those selling it for development. Title deeds for mortgaged property were never produced, leaving the ‘owners’ with worthless property they could not sell and that they did not own. Some of it was even knocked down.
Cyprus, A Place To Stash Your Cash
It was stated in a Telegraph article that there has been a huge influx of money laundering crime, which has been laid firmly at the door of the Russians. The Russians were not the only money launderers in town, they are just the biggest single group. With three airports and a large port, it’s an ideal drop of point in easy reach of may destinations.
Cyprus has always held a very strategic post in the Mediterranean due to it’s location. It’s a scrap of land that many have tried to own, conquer or use for their own ends. Cyprus governments knew this and used it at every opportunity. Mincher Surveys – Est. 2022
Bye Bye Oil & Gas
One solution to the crisis that Cypriot officials are proposing is to trade their recently discovered huge oil and gas reserves in return for cash to pay off their debts. The president has already asked his Russian friends to use this as a get-out-of-jail-free card for the Cyprus banking system. A third solution is a combination of this and taxing the rich who have over £100k in the bank 10% of their savings.
By banning wealthy Cyprus occupants from taking money out of their own accounts within Cyprus, they may just hop on a plane to do it somewhere else in Europe or abroad, creating a financial pain for banks elsewhere as large chunks of money are transferred out of Cypriot banks to dodge the tax.
According to Sky News bulletins, “Cypriot banks lost 4.5bn euros (£3.8bn) – equal to a quarter of the island’s gross domestic product – when Eurozone leaders decided to write off Greek debt last year.”
Cyprus has been trying to sell off the family jewels (state assets ) to help cover some of the debt and balance the public finances, which didn’t scratch the surface of the debt.
With all this turmoil going on, I can’t help but feel this may just be a tip of the iceberg with more pain ahead for beleaguered islanders and foreign investors.
