All banks operating in Cyprus, including the subsidiaries of Greek banks, are robust and secure, Central Bank of Cyprus has announced, commenting on the possible impact of the financial crisis the world is facing and worries over the strength of Cypriot financial institutions.

In response to media questions, CBC issued today an announcement in which it reaffirms that all banks and Greek banks subsidiaries operating in Cyprus “are robust and secure.”

“Cypriot banks do not face any problems and their liquidity remains very satisfactory,” Central Bank notes.

Source: Financial Mirror

Imports from Greece have reached 1.1 billion euros, marking a 16% increase, said Commerce, Industry and Tourism Minister Antonis Paschalides.

Speaking at a press conference on Thursday on the sidelines of the 73rd Thessaloniki International Fair (TIF), Paschalides said that the balance of trade between Cyprus and Greece leans against Cyprus since in 2007, the total commercial transactions rose to 1.3 billion euros, marking an increase of 18%, compared to 2006 when it was 1.1 billion euros.

Cyprus exports reached 214.8 m. euros while exports to Greece amounted to 58.2 m. euros, registering a 16.0% increase compared to 50.1 m. in 2006.

Despite the imbalance, said Paschalides, numbers indicate that the Cyprus market prefers Greek products, putting Greece at the top on imports to Cyprus, while Cypriot products rank second in exports to Greece. “We can say that these figures are at a very good level with good prospects for the immediate future”, the Minister added.

Source: Cyprus News Agency

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

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

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

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

Cyprus joined the euro-zone on New Years day becoming the 14th European Union member state to adopt the common currency, with most of the conversion going well despite minor difficulties in some shops and smaller bank branches running out of new notes and coins.

The introduction of the euro was a landmark in the history of Cyprus, with feelings muted as some people saw benefits of joining the eurozone, while others were sceptical that they had lost the power of a strong Cyprus pound, just as the French gave up the franc and Germans abandoned the mark.

The Central Bank of Cyprus too has relinquished its exchange and interest rate setting authority, decisions that will now be taken jointly at the European Central Bank in Frankfurt.

Finance Minister Michalis Sarris said at a public celebration moments after midnight that joining the eurozone was an indication of the island’s healthy economy and that “it was a tough ride getting here”. He also congratulated his Maltese counterpart and read out a letter sent to Malta’s president from Tassos Papadopoulos, as the smaller Mediterranean island state also adopted the euro an hour after Cyprus, raising the eurozone members to 15.

Sarris said later on Tuesday that the whole operation went smoothly and that most of the Cyprus pound notes and coins will have been collected by mid-January, with some people holding on to samples of bygone days as memorabilia.

Few cases were reported of kiosk owners and foreign staff at some bakeries not coping with the new currency and mixed change, or running out of euros and giving change in CYP coins. Pharmacies and fast-food outlets working on Tuesday seemed to have adjusted well with their cash tellers showing both currencies in receipt as well as change.

But some people also had some simple questions that remained unanswered, possibly due to the delay in the information media campaign and the absence of practical examples for people to identify with.

When Cyprus applied to join the Exchange Rate Mechanism (ERM2) and subsequently headed towards adopting the European single currency as its own, the conspiracy theories of this generally pessimistic nation took a quantum leap with everything that went wrong being blamed on the euro in the run up to the January 1, 2008 date of adoption.

Spiraling fuel prices, a drop in tourism, rising property prices and more expensive tomatoes in the traditional salad were all blamed on the anticipated use of the euro, a negative attitude reflected in all recent Eurobarometer surveys that showed low levels of confidence in the euro and the Eurozone club.

Source: Financial Mirror

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

Cyprus appears to have passed the final Maastricht test in what could be the last inflation report before the country’s European partners consider whether Cyprus has met all the Maastricht criteria for adopting the euro.

The EU-harmonised consumer price index in April rose by 1.6% compared with April 2006, slightly ...   more »