Cyprus’ Commerce Minister Antonis Paschalidis announced there have been informal Greek business interests towards participation in the second run for licenses concerning the exploration of crude oil and natural gas reserves in the coastal area of Cyprus.

The Cypriot government has also confirmed its plans for partnerships with countries willing to supply natural gas to the country.

Source: FOCUS Information Agency

Cyprus is finally growing closer to unification. For 34 years it has been divided, following a Turkish military invasion in 1974, which split the country in two. But on Wednesday morning, Cyprus President Demetris Christofias arrived at a compound in Nicosia to meet Turkist Cypriot leader Mehmet Ali Talat, in the hope of finding a resolution to the island’s division.

Christofias and Talat will want to concentrate on the larger economic picture in continued discussions over the coming weeks. Unification of the island would likely give rise to a flood of foreign investment, and also provide a big boost to Turkey’s hopes of joining the European Union. It may even reignite last year’s oil and gas study by the Greek Cypriot Government of untapped resources in the Eastern Mediterranean. A 70,000 square kilometer sea area south and south-west of the island could contain reserves of between 6 and 8 billion barrels of crude.

This is the fifth time the two leaders have met in 2008, and the outcome is looking positive for peace. The two moderate figureheads are backed by a pro-unification consensus from all the key international organizations and governments. "All the stars: the United Nations, EU, United States, Turkey, Cyprus and the United Kingdom, are aligned for the first time," said David Lee of specialist risk consultancy, Control Risks.

But challenges will lie ahead as discussions, continuing on Sept 11, turn to the economy. Economic issues caused the termination of talks in 2004, with the Greek-Cypriots unable to see the benefits of unification at that time; many of the Greeks who lost their homes in the North at the time of the division, would not have got them back. Businesses in Cyprus are struggling too--a report in the Cypriot Financial Mirror’s showed this week that profits for companies listed on the Cyprus Stock Exchange tumbled 47.0% year-on-year, to 465.5 million ($669.4 million) in the first six months of 2008.

And the two sides of the island are still economically unmatched. The Greek-Cypriot South is a prosperous, popular holiday destination, which sees over three million tourists per year, and has been on the International Monetary Fund list of the 32 "Advanced Economies of the World" since 2001. The Turkish-Cypriot North, by contrast, is heavily dependent on agriculture and government service, and has a gross domestic product approximately a third the size of the South. The North has suffered from an international trade embargo and little foreign investment as many have been wary of its de facto administration that is recognized by just one country, Turkey.

Lee says that the most important issue for unification is not the economic disparity between the two sides at present, but the "technical issues" central to the country’s reform, the most pressing of which is how a unified government would run on a day-to-day basis. The potentially explosive issue of housing rights also remains. Many families, especially Greeks who lived in the North, are still not convinced they will reclaim their lost homes.

Source: Forbes.com

The Cyprus Tourism Organisation (CTO) has announced the opening of a new air connection between Larnaca airport and the Birmingham International Airport by the “Monarch Airlines”, next spring.

According to an announcement, issued here today by the CTO, from March 29, the “Monarch Airlines” will begin operating the new connection twice a week, on Wednesday and Sunday.

The CTO pointed out that the new air connection consists a significant development to improve the Cyprus accessibility.

So far, the “Monarch airlines” operate flights to Larnaca from the airports of Gatwick, Luton and Manchester.

The Cyprus Tourism Organisation also noted that a number of airlines, like Easyjet, Sky-Europe, Flyglobespan, Jazeera, Lufthansa and Emirates, have either initiated air connections with Cyprus, or expanded their routes to Cyprus.

“The CTO will soon announce a strategic plan for developing new air connections between Cyprus and other international airports”, added in the announcement.

Source: Financial Mirror

Cypriot Finance Minister Charilaos Stavrakis remains adamant that despite the decline in tax revenue, the country will still manage to report a 0.1-0.6% of GDP budget surplus for 2008, or in numerical terms, a surplus of EUR 20 mln to EUR 100 mln.

Public debt meanwhile, is set to drop substantially to 48.5% of GDP in 20008 from 59.7% in 2007 and compared to the EU 27 average of 65.2%, with Stavrakis explaining to the Financial Mirror that the impressive improvement is due to the accounting treatment of sinking funds, as well as the fact that the country is running a budget surplus.

Stavrakis however is worried at the health of state finances, since on the one hand, tax revenue from capital gains taxes is sharply lower as a result of the decline in property prices and activity, while on the other hand, revenue from VAT is up 17%, indicating strong consumer driven activity.

“Consumer consumption cannot keep up at the current pace, which is why I expect that VAT receipts will go back to their ‘normal’ average increase of 7-8%, which is why we need to boost revenue from other sources,” said Stavrakis.

E-government

Stavrakis says one way to improve state finances is to make the economy more competitive, reduce civil servant hiring and place more emphasis on e-government, which improves the level of service, increases efficiency and at the same time is more cost effective.

“80% of state expenditure goes to civil servants pay, which is rising 7-8% annually due to COLA and pay agreements, while 13% goes on the development budget costing the government EUR 1 bln and 7% on operational expenses costing the state some EUR 0.5 bln annually,” says Stavrakis, adding that there is a lot of room for improvement

Source: Financial Mirror

Speaking at an event organised by the Cyprus Branch of the Institute of Directors, Stavrakis noted that despite international economic challenges, the local economy is a robust economy with satisfactory growth rates, almost full employment, controlled inflation, low interest rates and healthy public finances.

However, Stavrakis admitted that “the rising oil and food prices will eventually affect the economy of Cyprus”.

The inflation rate, said Stavrakis, is expected to range between 4% and 4.5%, compared to 2.5% in 2007, and the unemployment rate for the current year is expected to remain at the same levels as in 2007, when it fell to 3.9% of the economically active population.
The Cypriot Minister also noted that public finances remain at a good level and the fiscal balance is expected to remain in surplus, around 0.5% of the Gross Domestic Product. In addition, public debt is projected to fall to 48% of the GDP in 2008.

Stavrakis pointed out that the decrease in the rate of growth in the construction and banking sectors leads to a smaller increase of the government revenue and puts incremental pressure on the fiscal balance.

“The number of foreign investments in Cyprus continues to grow significantly, according to the data of the Department of the Registrar of Companies and Official Receiver, with Russia becoming the most important economic partner of Cyprus,” Stavrakis noted and added: “Russia is a country with very good economic potential.”

Regarding inflation, Stavrakis stressed that its rising trend needs attention, because any price increase affects Cyprus to a greater extent than other competitive to Cyprus countries. “As a result, Cyprus becomes less competitive”, he added.

Source: Financial Mirror

Virtually year-round sunshine and a stable economy have long made Cyprus a popular choice for those buying a first or second home in the Mediterranean. Recently cited as a bright spot in the international property market, it was described in the Euro Housing Review by the UK’s Royal Institution of Chartered Surveyors’ as “a rare case of a country shrugging off the gloom”.

Source: FT.com

The Bank, Cyprus's largest lender, posted a 55 percent increase in its 2007 group net profit to 485 million euros and restated its profit guidance for 2008 to 540 million euros, an 11 percent increase over 2007. It is scheduled to release its first-quarter results on May 28.

After a year which saw it launch full banking activities in Russia and clinch a deal to acquire a bank in Ukraine, the bank told shareholders on Wednesday expansion into additional new markets was not foreseen in the near future.

"We expect 2008 to be a year of entrenchment in (existing) new markets, further expansion of our network in Greece and an increase in market shares in Greece and Cyprus," outgoing chairman Eleftherios Ioannou said.

"Although expansion into new markets is not among our immediate plans we are looking at conditions in countries of an interest to us through the presence of representative offices so when we decide to proceed we know the conditions on the ground," he told shareholders at its annual general meeting.

Chief Executive Andreas Eliades said the bank was not exposed to risks from the American sub prime crisis, which has had a domino effect throughout the global financial sector.

"The Bank possibly has the most robust liquidity in the Greek and Cypriot markets because the main source of finance are its client deposits, which are increasing," Eliades said.

Board members elected local real estate businessman Theodoros Aristodemou as its new chairman. Ioannou stepped down after reaching retirement age.

Source: Reuters

According to Gulf Weekly thousands of expatriates are enjoying the financial benefits afforded to foreign nationals who take up permanent residence in Cyprus. Lower costs of living, favourable tax regime and a warm, sunny climate have all contributed to the island’s success story.

The publication also highlighted that housing costs are playing a powerful role in helping UK nationals to decide where to relocate. The price of a house in Cyprus is much lower than that of a comparable property in a place such as Spain or France and the island is currently benefiting from a prospering economy.

The report concluded that “Cyprus [is] firmly in the top slot for Britons seeking a more attractive destination in retirement”.

The Telegraph also recently highlighted the appeal that Cyprus has for foreign nationals and property investors, citing the recent change from pounds to euros, favourable interest rates and rising house prices.

The labour force in Cyprus rose by 5.1% in the whole of 2007 to 393,377 people, according to the results of the quarterly Labour Force Survey.

Despite the rapid growth, all of the increase in the labour force was absorbed, as total employment rose by an even higher 5.8% to reach 377,948.

The number of people unemployed fell by 1.6% to 15,428, yielding an unemployment rate of 3.9%, compared with 4.5% in 2006.

In the fourth quarter alone, the labour force rose by 5.5% compared with the same quarter of 2006 to 398,903; employment rose by 6.3% to 384,852 and the number of unemployed fell by 0.4% to 14,051, yielding an unemployment rate of 3.5%.

The unemployment rate for young persons aged 15-24 was 10.2% in the fourth quarter compared with 10.5% in the corresponding quarter of 2006.

Source: Financial Mirror

Of the total unemployed, 62% had searched for a job for a period of less than 6 months; 16.3% for a period of 6-11 months, while 21.7% had searched for a job for one year and over.

The number of registered unemployed fell by more than 1,000 in January 2008 compared with January 2007 thanks to a decrease across several key sectors. 

The number of unemployed registered at the District Labour Offices on the last day of January 2008, reached 13,571 compared with 15,041 in January 2007.

Falls of around 200 to 300 or more were recorded in the sectors of manufacturing, retail and wholesale trade, transport, restaurants and hotels, and construction.

For seasonal reasons the number of unemployed was 783 higher than in December 2007. A registered unemployment is not published but according to the most recent Labour Force Survey the unemployment rate was 4% in the third quarter of 2007.

Source: Financial Mirror

Bank of Cyprus profits are sustainable based on core banking operations and excellent relations built with clients in Cyprus and abroad, said Bank of Cyprus Group CEO Andreas Eliades responding to the global equity meltdown.

“I will not comment on the level of share prices, but I can assure you that Bank of Cyprus and Greek banks in general are well placed to ride out the current storm affecting all markets since they are not exposed to the US sub-prime risks and boast adequate liquidity to cover their funding needs,” said Eliades.

He was speaking at the inauguration of the Bank of Cyprus floor at the Head Quarters building of the Cyprus Chamber of Commerce & Industry (KEVE).

Eliades told the Financial Mirror at the KEVE event that Bank of Cyprus expansion and business development plans are proceeding on schedule and more details about the Strategic Growth plan for 2008-2010 will be released in February.

KEVE Chairman Manoths Mavromatis expressed his confidence that global markets will be able to ride out the crisis hitting equities because “many areas continue to register satisfactory growth, unaffected by the slowdown in the US.”

Bank of Cyprus has sponsored the 6th floor in the KEVE building as part of its efforts to help the island’s business community.

Source: Financial Mirror

The European Central Bank (ECB) has left interest rates unchanged at 4%.

High oil prices and an increase in the cost of food have buoyed inflation in the eurozone at a time when economic growth is seen slowing.

The ECB has said inflation remains a problem, noting that December's annual rate of 3.1% was above its 2% target.

It is not alone in having to balance growth and inflation problems. The Bank of England also left its main interest rate unchanged on Thursday.

The Bank left its main UK borrowing rate at 5.5%, despite calls from retailers and many business leaders for a cut to boost economic growth.

One analyst predicted that it would be a long wait for a change in eurozone rates.

"After the ECB raised interest rates to a roughly neutral 4.0% in June, the strong euro and the lingering turmoil in money and credit markets will likely keep the central bank on hold until September 2008," said Holger Schmieding at Bank of America.

There were strong comments from ECB President Jean-Claude Trichet at a news conference to explain the rate decision.

He warned eurozone employers not to allow wages to spiral.

"We call upon them to behave properly," he said.

"We will not tolerate that you will engage in a spiralling (of inflation)."

Mr Trichet appeared to be warning that employers need to control wages or there would be an immediate rise in interest rates.

"I think that the ECB feels that inflation expectations have not picked up sufficiently to warrant a rate hike today and they're just sending out the message to make sure the expectations don't pick up," said Mark Miller at Bank of Scotland Treasury Services.

Source: BBC

THE EURO changeover has proved to be a success in Cyprus and Malta in the first week of January. The changeover of all cash and non-cash transactions to the euro appears to be going swiftly and without noteworthy problems. After only a few days, the euro had already largely replaced the Cyprus pound and the Maltese lira in people's wallets and purses.

Less than week after adopting the euro, nearly three quarters of all cash payments were made in the new currency in Cyprus, the EU Commission said yesterday.

A statement from the Commission said that on January 5, some 72 per cent of all cash payments were made in euro and that 74 per cent of Cypriots had only or mostly euros in their pockets.

“The adoption of the euro in Cyprus and Malta is proceeding very swiftly. This is testimony to the good preparations beforehand for which all involved in the two countries, starting with their respective governments, must be congratulated,” said Joaquín Almunia, European Commissioner for Economic and Monetary Affairs.

“It is now crucial that both countries continue to implement sound fiscal and budgetary policies so that they can fully benefit from economic and monetary union,” the Commissioner said in a statement yesterday.

The latest survey, the second since euro adoption, found that the ratio of euro cash payments in shops increased quickly during the first week.

Retailers gave change exclusively in euros in virtually all cash transactions where change was given. In Cyprus the figure was up to 97 per cent by last Saturday.

As people appeared to be eager to exchange their national cash holdings into euro and to withdraw euro cash, there were still some queues at banks but the situation seemed to be getting back to normal, the Commission said.

In Cyprus, some 179,000 over-the-counter exchanges and withdrawals were made between January 1-4, involving some €253 million. In Malta, approximately 132 000 over-the-counter withdrawals took place between January 1 and 5, for a total amount of around €88 million. Some 105,000 ATM withdrawals had been made in Cyprus by January 4, and 202,000 in Malta up to and including January 6.

With respect to the conversion of prices into euro, so far only a few incidents of undue price increases have been reported in both countries, said the Commission citing parking fees, cinema tickets and doctors' fees.

“The authorities are investigating all these cases and are asking those responsible to revert to the former prices where necessary,” the Commission said.

“Consumers are encouraged to remain vigilant and to report any cases of unfair pricing to the authorities or consumer associations.”

In Cyprus, Central Bank officials said yesterday that by yesterday around €285 million euros were in circulation and that the Bank had collected up around £120 million.

Source: Cyprus Mail

The euro area (EA13) seasonally-adjusted unemployment rate stood at 7.2% in November 2007, unchanged compared with October. It was 7.9% in November 2006. The EU27 unemployment rate was 6.9% in November 2007, the same as in October. It was 7.7% in November 2006.

In November 2007, the lowest rates were registered in the Netherlands (2.9%) and Denmark (3.2%), and the highest in Slovakia (11.0%) and Poland (8.5%).

These figures are published by Eurostat, the Statistical Office of the European Communities.

Over the last year, twenty-three Member States recorded a fall in their unemployment rate, two an increase, and Luxembourg and Romania remained stable. The largest relative falls were observed in Poland (12.2% to 8.5%) and Bulgaria (8.2% to 5.8%). Increases were registered in Portugal (7.9% to 8.2%) and Ireland (4.2% to 4.3%).

The unemployment rate for males fell from 7.0% to 6.5% between November 2006 and November 2007 in the euro area and from 7.2% to 6.4% in the EU27. The female unemployment rate declined from 9.0% to 8.0% in the euro area and from 8.4% to 7.4% in the EU27.

In November 2007, the unemployment rate for under-25s was 14.2% in the euro area and 14.9% in the EU27. In November 2006 it was 15.8% and 16.5% respectively. The lowest rates for under-25s were observed in the Netherlands (5.0%), Ireland (8.1%) and Austria (8.3%), and the highest in Greece (22.6% in the third quarter 2007), Romania (21.6%) and Italy (20.2% in the third quarter).

Eurostat estimates that 16.4 million men and women in the EU27, of which 11.0 million were in the euro area, were unemployed in November 2007. In November 2006, 18.3 million men and women in the EU27, of which

12.0 million were in the euro area, were unemployed.

In November 2007, the unemployment rate was 4.7% in the USA and 3.8% in Japan.

Source: Eurostat

History was made this week in Cyprus when the central bank met to set interest rates.

Not because it was for the first time, but because it was for the last. For the record, governor Athanasios Orphanides said the three rates set, the key refinancing rate, the Lombard rate and the overnight deposit facility, would all stay as they were, the Cyprus Mail reports.

Mr Orphanides said any changes would have "no marked difference" and the monetary policy committee backed this view. Thus the curtain starts to fall on the Cypriot Pound.

New Year's Day will be a momentous one. It often is somewhere in the European Union, with 2007 seeing Bulgaria and Romania expanding the club to 27 members. 2008 will see the number of eurozone members in the union climb to 15, with Cyprus joining fellow Mediterranean island nation Malta.

The Cypriot central bank is on record as stating that this event is as momentous as it gets, saying: "Cyprus is preparing for one of the most important changes in its history." This is undoubtedly true in economic terms at least, for the central bank statement went on to add that this brought the country into an economic zone which is home to 310 million people.

While Mr Orphanides and his colleagues seek new employment, property investors should be very busy in the country, according to worldwide real estate firm Property Abroad. Director Les Calvert said that the country was already hugely popular, stating: "Cyprus has been increasing in popularity over the last year and more people are now making specific enquiries for property in Cyprus."

Part of this, he noted, was because of a financial situation which was in fact about to change: "There are still a few properties around that are free of VAT out there so people are jumping on and trying to snap up properties where they can."

Yet Mr Calvert was convinced that the country's property scene would benefit from the euro, predicting: "When the euro comes in it will make the property market a lot more open and I expect the market to rise quite healthily."

He advised that investors would be able to make good use of "excellent" foreign currency mortgages provided by Swiss and other banks, though these were "more advantageous" for those living or at least gaining income from overseas.

Cyprus will await the new year with interest, preparing for an economic and political future tied into the heart of Europe. For investors looking to sink their capital into property in the eurozone, a new opportunity awaits.

Source: The Move Channel

Greek banks are racing ahead with plans to strengthen their presence in Cyprus with Eurobank and Piraeus already having secured Central Bank permits to start local operations, while Aspis Bank may also be interested if its holding group decides to dispose of its stake in Universal Bank.

Other Greek banks ...   more »