NICOSIA – With his country locked in a fiscal crisis and banks still under capital control, Cypriot President Nicos Anastasiades said the difficulties will be overcome and the economy will recover sooner than expected.
“Despite the difficulties which we are facing due to the ongoing economic recession, we can achieve a miracle,” said Anastasiades. He added that, “Cyprus had previously achieved the same goal in the past,” referring to economic troubles in 1974 when Turkey unlawfully invaded the island, and as it still occupies the northern third.
In a meeting in Doha with businessmen from Qatar and Cyprus, he outlined the government’s efforts towards recovery while trying to persuade possible investors that Cyprus is still attractive for them.
Anastasiades pointed to the potential of energy reserves and hydrocarbon deposits in the Cypriot Exclusive Economic Zone (EEZ) which has drawn international attention for exploration.
He didn’t say how he expects to drag the economy back at the same time the government is imposing austerity measures and confiscated 47.5 percent of the monies in private bank accounts over 100,000 euros ($137,000) to make depositors pay for the mistakes of banks who triggered the crisis.
The banks took more than 4.5 billion euros ($6.13 billion) in losses with big holdings in Greek bonds that were devalued 74 percent and in big loans to Greek businesses that went belly-up in that country’s fiscal crisis.
The government, in return for a 10 billion euros ($13.67 billion) loan from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) has had to come up with revenues or cuts equivalent to 13 billion euros ($17.72 billion) because the lenders said the debt would otherwise be unsustainable and couldn’t be repaid.
Anastasiades – as he has a number of times before without coming through – promised yet again that the capital controls limiting depositors to taking out only 300 euros ($409) per day and put similarly strangling ceilings on businesses would be lifted in coming months.
“The capital controls imposed on the Cyprus banking system are to be completely lifted in the near future, in the coming months, and we are now witnessing increased inflows from foreign residents,” he said, appealing to Qatari businessmen to invest in Cyprus, according to the Cyprus Mail.
Anastasiades said that during his meeting with Emir of Qatar both sides reaffirmed their commitment to further enhancing Cyprus-Qatar cooperation, at all levels, including economic cooperation.
“Attracting investments is the Cyprus government’s top priority,” he said as investments were the catalyst for economic growth, job creation and prosperity.
He said despite its economic woes, Cyprus still retained its competitive advantages. These included its competitive corporate tax rate of 12.5 percent, and an extensive network of double taxation treaties, including one with Qatar itself.
Cypriot had been criticized before the crisis for offering easy terms for depositors and now is under siege from others who warned that the government, if the recovery falls short, could again seize money from private accounts.
Anastasiades, however, during his three-day visit to Qatar, said there is opportunity in crisis and that Cyprus was a safe bet for investors even though the banks aren’t lending or letting companies access their money.
“In Cyprus opportunities for growth exist in most economic sectors, including shipping, tourism, large-scale development projects, education, health and renewable energy,” said Anastasiades.
Cyprus’ hydrocarbons discovery created excellent prospects for investments and cooperation, he added.
Evaluating his visit to Qatar after its conclusion, Anastasiades described it as very “important and productive”, and announced forthcoming visits to Cyprus by delegations from various investors, or even “on behalf of the Emir himself,” The Mail reported.
“That is an important element”, he said with regard to the imminent visits. “If we can be persuasive, we will benefit.”
Foreign Minister Ioannis Kasoulides also waved the flag for Cyprus. “We did not come here to ask for free funds. What we want is to ensure that investments by any party – whether state or private – will offer mutual benefit to both sides,” he said.
While he was in Qatar, Troika envoys were back in Cyprus to check the books and see if the government is living up to its targets as a condition of the ongoing loans.
Earlier assessments, Anastasiades said, showed the country was on track and he said there would be no let-up in meeting the reforms. The Troika is looking hard at the effect of the crisis on the banks, which are still struggling despite the controls put on withdrawals and businesses.
With record unemployment, banks are struggling to cope with bad loans. Some 46 percent of all loans, or 19 billion euros ($26 billion), are considered non-performing, similar to Greece where big pay cuts, tax hikes and slashed pensions left some 42 percent of loans in the NPL pile.