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Cyprus adventures through times

English.news.cn   2013-03-31 19:38:44            

by Petros Petrides, Liu Yongqiu, Chen Zhanjie

NICOSIA, March 31 (Xinhua) -- Most Cypriots reacted with anger and disbelief at the new troika bailout deal, while international media reacted with respect to the calmness and dignity when banks reopened after a two-week forced bank holiday.

Yet, the Cypriots consider it as another turbulent chapter in the long history of their country which will be faced and overcome as other adversities, recent and distant, have been.


Actually, the story of Cyprus is one of constant conflict going back to the start of history about 9,000 years ago due to the island's geo-strategic position in the eastern Mediterranean basin.

In ancient times, it was a stepping stone for sea farers going south to Egypt and to the riches of the east. In Mediaeval times, it was a base for sea farers to control commerce, and in recent times, it has been called an unsinkable aircraft carrier controlling the Suez waterway, the passage to India and the Middle East oil fields.

Almost every kilometer of the island is dotted with signs of past conquerors -- ancient-walled Greek kingdom cities, Greco-Roman theaters, medieval castles and city walls.

The Cypriot society is held together by close family relations and the ideals of solidarity but also features a strong sense of ownership -- hence the anger at what they consider a lack of solidarity on behalf of their European partners and also an encroachment on their property in deciding the bailout.

When Cyprus became an independent country in 1960, its economy was based on agriculture, mainly exporting potatoes and oranges to Britain and northern European Countries.

However, Cypriot enterprises soon built up a substitution industry manufacturing previously imported goods, which soon replaced agriculture as the main contributor to the gross domestic product as tourism started to gain momentum.

In 1974, Turkey militarily intervened and controlled the north of Cyprus following a coup on the island by Greek army officers.

The event dealt an almost deadly blow to the economy which lost 75 percent of its agricultural land, its entire industry and all tourist infrastructure. But it took only about six years for Greek Cypriots to bring about what had been described as an economic miracle despite the economic recession-inflation crisis of the 1980s.

This was achieved by the country's efforts to develop tourism into a modern large-scale industry and establish a service and banking sector.

Cyprus introduced a low corporate tax of 10 percent and developed its banking services, attracting thousands of offshore companies and shipping companies.

The biggest push to the economy came after the collapse of the Soviet Union, when several thousand Russians made their home and established business in Cyprus, helping the banking sector to achieve an unprecedented development.

There have been claims of money laundering in Cypriot banks, to which the Moneyval, a Council of Europe team, is making an independent investigation.

However, the close relations between Cyprus and Russia were seen with a suspicious eye by some European countries. This became manifest when Germany tried to impose a loss on big foreign deposits.

Helped by the wealth brought by tourism and construction, the state built up a welfare state in which almost all Cypriots had free medical care, free education up to university level and pensions which allowed a comfortable living for all.

The government of former President Demetris Christofias continued to spend and burden the sovereign debt after the world economic crisis set in over two years ago.

His then Finance Minister Charilaos Stavrakis maintained that Cyprus would be untouched by the crisis, even when the country was warned of the dangers of its oversized banking system, about 8.5 times larger than the annual 17.5-billion-euro (22.4 billion-U.S. dollar) economic turnover of Cyprus.

Critics accused the Cypriot government of having delayed so much that it gave the opportunity to the troika to step up its demands on Cyprus

Deposits in Cypriot banks amounted to 67.5 billion euros in February, more than 60 percent of them classified as domestic and the rest foreign with an estimated 20 billion euros coming from Russian investors and depositors.

About 38 billion euros are in deposits of over 100,000 euros, which are uninsured under Cypriot -- and European -- legislation.

The two largest lenders, Bank of Cyprus and Cyprus Popular Bank, exposed themselves to the Greek debt after buying large quantities of bonds even at a time when German banks were trying to get rid of them. The two banks lost an estimated 5 billion euros from the 74-percent haircut on the Greek debt, forcing Christofias to seek bailout.


Banks in Cyprus reopened for business on Thursday with remarkably few people lined up outside -- to the relief of authorities which have feared a run on the banks following a closure since March 16.

"This is a new period that starts in Cyprus from today. People are in shock. They are very worried. But I think they will realize from today what actually happened in our lives," artist Elena Christodoulidou told Xinhua at the Evanthous Street branch of Cyprus Popular Bank in central Nicosia.

She is optimistic about the future. "I don't want to lose my hope. I think this country is a beautiful country. A restructuring is needed. And I hope better days will come, but completely in a different, different way," she said.

Christodoulidou expects the big change which is happening in Cyprus to bring the best results for its people, especially for the young generation.

The Cypriot government announced on Saturday that depositors of over 100,000 euros in the Bank of Cyprus will have their money initially slashed by 37.5 percent and will get category-A shares in compensation, meaning that they will become new holders of the bank's equity.

A further 22.5 percent of big deposits will be blocked for 90 days to cover recapitalization as needs arise. The remaining 40 percent will not be subject to any haircut, but will be blocked until the recapitalization is made final.

And now what?

Cypriots have a reputation of tenacity in the face of adversity and of being hard workers. Most people believe the island will be soon on its feet. Its spiritual leader, Archbishop Chrysostomos, says that despite difficult days ahead it will take only some years for the economy to stand on its feet.

Former Central Bank Governor Afxentis Afxentiou estimated that the current nightmare will be a thing of the past in three years.

Editor: Zhu Ningzhu
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