Cyprus Economy all gloom?

[jackk19]

Hi,

I gave been reading various articles regarding the Cyprus economy mainly with respect to property. There are proposed austerity measures including numerous tax increases, unsolved title deed problems, rating agencies downgrading Cypriot banks and economy, high lending rates, decreasing foreign investment and purchases.

Is the picture for land and property really this bleak? Even if it is now, I cannot see how such a gloomy situation can be resolved in the short and medium term.

If it were not for tourism, then from reading all this 'news' we may as well turn off the light and shut door behind Cyprus?

K

[Nigel Howarth]

Hi jackk19

Things are not too good at the moment. Unemployment in Cyprus has reached unprecedented levels and the economy is not in a good shape. The Government recently got the go ahead to borrow €2.5 billion from Russia.

The banks are are also having problems as their bought Greek Bonds. Eurozone finance ministers recently agreed that banks should accept bigger losses on their Greek bonds but have not said how large these losses should be. In July, banks tentatively agreed to take a haircut of around 21%. But analysts are now saying that they may have to accept losses of between 50% and 60%.

The real estate market has virtually collapsed and property sales are lower this year than they were in 2009 when the market collapsed. It now appears that property developers are not selling enough properties to cover their loan repayments to the bank.

But tourism is up this year - and that news is encouraging.

Regards,