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Cypriot report Cypriot report
by Euro Reporter
2012-11-09 08:15:16
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Cyprus official says bailout deal with visiting troika team may take longer than expected

Cyprus is unlikely to sign a bailout deal during the upcoming visit by officials from potential creditors, a senior Cypriot official said Thursday. The official, who spoke only on condition of anonymity because of the sensitivity of the negotiations, said he didn’t think an agreement would be signed during the talks, starting Friday, between the Cypriot government and a team from the European Commission, the European Central Bank and the International Monetary Fund. Asked if a deal was expected at the end of talks with negotiators from the three organizations, collectively known as the troika, the official said “no.” The official said an agreement may come when they return for another round of talks at a later date that hasn’t been scheduled yet. The Cypriot finance ministry said in a statement Thursday that the talks with the troika officials will aim to find broad agreement on “structural matters, the macroeconomic framework as well as issues related to Cyprus’ financial sector.”

Cyprus sought financial aid in June to support its banks that lost billions on bad Greek debt and loans. It also needs the cash to meet its payments as it has been unable to borrow from international markets since the middle of 2011. The country had been getting by on a €2.5 billion ($3.18 billion), low-interest loan from Russia, but that has been used up. Moscow still hasn’t replied to another Cypriot loan request for an additional €5 billion. Cypriot officials say they have enough cash on hand to see the country through until the end of the year, but want a bailout deal as soon as possible. Although the Cypriot finance ministry held out hope for an agreement this month, Finance Minister Vassos Shiarly said last week that he’s confident an agreement will be in place before the year is out. Shiarly has said the government has essentially met a troika condition for shaving around €1 billion ($1.27 billion) from the bloated public sector and generating revenue from tax hikes over three years, but is reluctant to go ahead with privatizing profitable, state-owned companies, putting cooperative banks under centralized supervision and entirely doing away with inflation-indexed pay rises.

The main hurdle to a deal is how much money the Cypriot banking sector — which has assets worth eight times the size of the country’s €18 billion economy — will need to recover. The Cypriot government says it’ll need somewhere around €6 billion, while troika officials estimate it will be at least twice that.


Cyprus denies claim it is Russian money haven

Cyprus’s government on Monday dismissed a German media report that claims a financial bailout for the island nation would primarily benefit Russians who have stashed billions in ill-gotten gains in its banks. Government spokesman Stefanos Stefanou rejected the article by German news magazine Der Spiegel, which cited the conclusions of a classified German intelligence service paper, as an attempt to sully the country’s reputation as an international investment centre. Stefanou said Cyprus has enacted effective anti-money laundering laws that adhere to European Union law and which have earned plaudits from, among others, the International Monetary Fund.

The Spiegel article said that Germany’s foreign intelligence agency (BND) estimates Russian deposits in Cypriot banks amount to over €20 billion ($25.55 billion), more than Cyprus’s €18 billion in national GDP. The BND also accused Cyprus of facilitating money laundering by making it easy for Russians to obtain citizenship. Stefanou said Russians prefer to deposit money in Cyprus mainly because of advantages offered by its banking system. For example, Cyprus has a treaty with Russia that avoids double taxation on investments and its corporate tax rate is 10 per cent, one of the lowest in the EU.

Asked to comment on the Spiegel article, German Chancellor Angela Merkel’s spokesman Steffen Seibert said that the government on principle never discusses intelligence matters. Cyprus is still negotiating its potential bailout with the so-called troika, the European Commission, the European Central Bank and the IMF. “The discussion is currently moving forward with moderate speed,” German Finance Ministry spokesman Martin Kotthaus said. He insisted that having a Cypriot bailout agreement before the end of the year “will be difficult.” Stefanou said Cyprus is now waiting for word on when the troika officials will visit the country for a final round of bailout negotiations.


Cyprus construction activity may be improving

Although the number of building permits issued in Cyprus fell slightly compared to August last year, both their value and the number of residential properties for which permits were issued increased.

THE NUMBER of building permits issued in August 2012 stood at 477 compared with the 478 issued in August last year; a small decrease of 0.2%, according to the latest figures released by the Cyprus Statistical Service.

Compared with August 2011, the total area of these building permits decreased from 130,118 square metres to 97,744 square metres (-25%), however, their value increased from €113.7 million to €125.7 million (11%).

During August, building permits were issued for:
Residential buildings – 293 permits
Non-residential buildings – 75 permits
Civil engineering projects – 73 permits
Division of plots of land – 33 permits
Road construction – 3 permits

During the period January – August 2012, 4,761 building permits were issued; a decrease of 6.7% compared to the number issued in the same period last year, while the total value of these permits fell by 23.4% and their total area fell by 31.1%.

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