Venue: A “private room” at the back of a restaurant in the centre of Larnaca. Dateline: shortly after 15 March 2007 following a vote in the House of Representatives. 12.30 am.
Stylios (A Banker), Christos (A Government Minister), Andreas (our Property Developer friend again!) and Marios (A Lawyer) are in jubilant mood as copious amounts of Zivania are distributed.
Stylios: I have to propose a toast to Christos. How on earth did you get it through the House (he says, referring to the recent vote on joining the Euro)?
Christos: (Accepting the congratulations warmly). Well, since we joined the European Union, it was really only a matter of time before we signed up to the single currency. We now have financial stability, a template for governmental and banking structures in the EU that we can adhere to and best practice models for every aspect of life in our new member state.
Little shot glasses of Zivania, on their way to lips, are halted in mid-air as all stare at Christos in disbelief.
(Cracking up with laughter, Christos jokes): Nah, I just promised the Deputies that the EU would give us all boat-loads of money!
Relieved, everyone laughs and toasts again.
Through the laughter, Andreas, slightly concerned, has a serious question.
Andreas: Stylios, explain to me again how the next phase of the plan works?
Stylios: I thought you would ask. (He shouts for the waitress who comes running, exchanges a few words and disappears through the door to be joined by an earnest, bespectacled young man carrying a laptop. Stylios introduces him).
This is my nephew, Georgious. He studied Socio-Economics and Politics at Edinburgh University (no tuition fees) so can fill us in on the details.
Georgious connects his laptop to the overhead projector, coughs and begins.
Georgious: Well, if we look at the examples of countries acceding to the Euro, historically there is a convergence in 10 year sovereign bond yield spreads to the German Bund (produces complicated graph with even more complicated spreadsheets) – Determinants of intra-euro area government bond spreads during the financial crisis.
Andreas: Are you speaking Greek? Or English even? Stylios, tell him to say something I can understand! He’s not making any sense.
Georgious: (sweating profusely and realising he’d better not blow his big chance to impress his uncle, especially if he wants to get into senior management in his uncle’s bank, rephrases to the level of his audience). It means that Cyprus banks can borrow money from international markets, say German and French banks, pretty much at the same rate as say Germany!
Everyone stares at him. Liquidity had always been a problem in development in Cyprus (as “not paying back” was – totally unjustifiably, I must add – regarded by many in international banking circles as a Cypriot national sport, no-one would normally lend to Cypriot banks at rates other than punitive).
Georgious continued: So, in theory, Uncle, your bank could, for a limited period only, borrow as much as it liked from other institutions (historic rates about 3%) and lend it to developers at whatever rates you liked (historic 7 – 9%) and, as long as they paid it back, you’d be making a fortune. (Stylios smiles proudly at his nephew).
Andreas (again): It’s alright for you, but what happens if there is a downturn in the market and I don’t sell all my property quickly? With interest rates of 9%, plus probably penal rates, I could be building up a mountain of debt that I may never clear!
Stylios (rising to his feet and patting Georgious warmly on the back as he takes a seat): That’s the beauty of the whole thing: you don’t have to pay the bank back at all! (Seeing perplexity ravaging Andreas’ features, Stylios explains further). You see, it’s not my bank’s money, we’re just borrowing it from other foreign banks. If you don’t pay me, I don’t pay them. If they don’t get paid, then their banks crash and their whole economies are thrown into turmoil, leading to massive social unrest, poverty, political upheaval and general depression.
Christos (chiming in): Who knows, maybe even war, with countries breaking up, economic migration, protectionism and scape-goating of migrant populations.
Stylios: Yes, yes, so they HAVE to make sure our banks stay afloat. No matter how much debt we have, they have no option than to keep financing us. If they stop, we just go back to what we had before where they don’t lend us money anyway.
Andreas (struggling with the concept but light appearing to dawn): I don’t get it, what’s to stop me from not even bothering to build in the first place if I don’t have to sell to pay you back? Koombarro (he asks, addressing his family’s long-term friend and adviser, Marios the Lawyer)?
Marios: Absolutely nothing. As selling property is not the main aim, if you build and sell, you get more money. If you build but cut whatever corners you can to save costs (i.e. no damp-proofing, no insulation, no electricity, running water, drainage etc.) when you build, you get more money. If you don’t build at all, you get even more money! My friends and I have kept the law on property fraud sufficiently lax for you to sell even the most disastrous pieces of concrete imaginable and never see the inside of a courtroom for non-payment of borrowings nor face any criminal prosecution. You can even sell the same property twice, even if it doesn’t exist.
The really great thing though is that, with the way we’ve set up the transfer of title process if you DO sell a property (existing or non-existant), then you can still use it as collateral to borrow even MORE money from Stylios right up until the contract of sale is registered at Land Registry by the conveyancing Lawyer; which would be me. Borrowing against the property after I tell Stylios when the sale was officially registered would be unfair.
(The Banker and the Lawyer exchange smiles. Marios continues): We thought it was the least we could do.
Marios (continuing): We’ll have to change EU lending criteria (on Non-Performing Loans, using only Loan to Valuation and not ability to repay) and lie about it until the EU find out. Valuations will be carried out by friendly Cyprus RICS registered Surveyors. Do we have any in the room?
(Everyone puts their hands up, including Georgious and the maid, returning with another bottle of Zivania).
(In anticipation of Andreas’ next question, Marios adds): Don’t worry about the EU, UN, Nato etc, we know how ineffective they can be (a brief moment of silence follows as the older guests’ hearts turn towards the direction of nearby Famagusta), besides, every member state can do pretty much what it likes (Implementation Deficit – Why Member States do not Comply with EU directives?), as the only sanction the EU can give for any non-compliance would be financial, and they’re the ones who would be giving us money to stay afloat in the first place. So, they are likely to kick any case against us by disgruntled buyers back to Cyprus and, as we’ve rather cunningly I think had the policy for years that there are no official translations of any laws and that the only legally-binding documentation is in Greek, we are in the process of drafting a paper which says that all grievances against us are civil matters and so will have to be taken up in the Cyprus Courts with a Greek-speaking lawyer. Apart from tiny bits of Italy, Armenia, Romania, and Ukraine, as well as Albania (who would want an Albanian lawyer?), ALL Lawyers would be us again. Oh, and maybe Greek ones, but they understand.
(All congratulate Marios on his carefully worked out plan. As an aside, he adds…)
Marios: All developers, bankers and my humble profession will be able to stash away all the borrowed money, with no fear of prosecution and any debts not written off will be saddled on the properties themselves. The courts will have cases running for years and, my professional colleagues and I will be there to, erm, assist until the plaintiffs eventually run out of money and go home. The long term plan is that once they’ve all gone, we can claim back our Cyprus soil. And if there’s anything I haven’t thought of, we can always change the laws as we go along. Any questions?
Andreas (not yet 100% convinced and to the general annoyance of the others): Er, yes, actually…. I take it we’ll be selling mostly to the English? (Marios nods). What’s to stop them rioting against us, really getting together as a group and putting us out of business completely through some form of collective action, say bad publicity, websites, boycotting of everything Cypriot until they get justice? And then there’s the UK Government who won’t take this lying down…
(Stylios waves to his nephew, who stands up and coughs again).
Georgious: I’ve been studying these people since I’ve been away and read up a lot on them. Firstly, in general, they have a deep sense of right and wrong and genuine moral outrage if they feel they are being unfairly treated. They have a faith in institutions though, probably because their own institutions work quite well, so will exhaust all of the conventional channels of redress before they realise that neither Cyprus, nor the EU, function anywhere near the way England does. Probably as a consequence of empire and probably unintentionally, they consider foreigners as being slightly inferior (hence outraged statements like: “The French have a better railway system than ours!” the implication being that “ours” SHOULD be better than “theirs” because we’re British!), so they are likely to consider their property situation as being a series of unfortunate events or unscripted chaos based on failings in our Cypriot systems rather than as a well-devised plan. They also DO like to consider themselves individuals, so being part of a protest movement which aims to find a collective solution to a problem that affects everyone is not something they would do naturally; being more prepared to find an individual escape (“I’m alright Jack”) is not considered selfish but clever. Competition, especially amongst themselves – an idea of “keeping up with the Jones” – is also favoured.
(All were silent as Georgious, now feeling the senior management job was virtually within his grasp, pressed on)…
Georgious: The English are normally friendly, well-mannered and of mild temperament, from what I’ve seen, but also blissfully unaware of the amount of deep-seated hatred against their nation from the world in general. Even though it’s in living memory, they tend to forget that they’ve invaded nearly everywhere – British have invaded nine out of ten countries – so look out Luxembourg – and were responsible for some pretty horrendous acts carried out all over the world, including here in Cyprus in the late 50’s, but also that they still illegally occupy 98 sq miles of ROC territory even now (the older guests nod in solemn agreement.
Georgious’ eyes narrowed as he pressed home his advantage with steely determination).
Georgious: Many English do not realise that for so small a country as theirs to be punching so far above its weight on the international stage, they have had to be extremely clever and extremely ruthless (while at the same time giving everybody the impression that they are the international Good Guys!) When hard choices need to be made between protecting the national interest and the rights of a small number of their citizens, the British State is more than capable of making those choices. Those 98 sq miles of prime territory, in the heart of potentially massive mineral resources and at the crux of 3 continents is of significantly more importance to Britain than the rights of those citizens.
So, in summary, the English will: refuse to believe what’s happening to them until it’s too late, wasting loads of money in the process going down official channels; they’ll refuse to believe Cypriots are capable of putting in place such a plan; they won’t understand why it’s happening; they WON’T organise to stop it and some of them will be only too willing to completely deny what’s happening for their own benefit (as: they have their deeds already; they want to sell their indebted property on to another unsuspecting Brit or because they have Estate Agencies etc. to run). Most importantly though is neither the EU nor their government will do a thing to help them. (Announces triumphantly) Gentlemen, our plan will be successful.
(Collective banging of glasses and fists on table, plus cheers. Andreas finally allows a broad grin to stretch across his face. However…)
Andreas: Er, one final question (pause). What will happen to the Republic of Cyprus with all the debt, potentially broken banks and a broken economy? You’ve talked about turmoil, massive social unrest, poverty, political upheaval and general depression; are we not abandoning future generations to a future without hope?
The sound of four voices raised in raucous laughter could be heard deep into the warm Mediterranean night.
@SoOJB. As I said earlier, I agree with much of what you put forward and certainly the key components. I did not put forward my explanation as being ‘default/accident’ but as one possible explanation (among the three I cited – there are others). I agree that the latter does not stack up on its own. That is why I stated that I prefer the combo explanation of ‘incompetence plus evolving expedience’.
My model certainly includes plenty of local and ad hoc conspiracies between the protagonist categories (just look at what has happened in Paphos and in Paralimni over the years, for example). However, for your model to work as a national conspiracy and in the literal way you expressed it, the conspirators who apparently sat down in that restaurant in 2007-8(?) would have had to include the chairmen and CEOs of the main banks, the Central Bank governor, all the main developers, senior partners of large law firms, a government minister or two and probably quite a few more. Maybe they did, but I doubt it – not literally at a single meeting a la Waldensee drafting of Hitler’s ‘Final Solution;.
I read your wonderful tableau more as a fable – to present a telling message – than as a literal happening. I eagerly await more!
Aww shucks, Guys, your comments are only too kind…
However, serious points were raised so I’ll try to answer them. Well, only the easy ones…
In reverse order:
Andrew, are you calling me a girl?
Mike: I like the idea of the play! I can already see Jabba the Hut as Stylios…
Stevie R: “You move into the property only to find that you have broken the law (Cap 22)â€Â.
Hands up all those who have thus broken the law? So, in any legal dispute with a developer, the purchaser is already in the wrong to start with. Funny that…
Brad P: “How long do you think it will take for the Cypriot government to clean up the mess they’ve created?”
If “The Plan†has any truth to it (?), then the political will does not exist to implement any changes at all. Plus, and it is difficult to comprehend, but, (from my last comments on “Cypriots are not foolsâ€Â) if we look at the maximum % NPLS compared to GDP it is possible to pay off as being 8% (give or take), then for the whole of the EU, as we speak, we have: NPLS = €1.294 tr (Bad loans at European banks hit $1.7 trillion) , GDP = €13.069 tr (Economy of the European Union), thus NPLs as % of GDP = 9.91%, which is above the rate the EU can pay. This means that unless someone steps in and clears (not lends) the debt, THE EU WILL NEVER BE ABLE TO CLEAR ITS BAD DEBTS (especially as austerity leads to shrinking GDP thus less money to pay off debts with). There WILL be bank crashes and severe knock-on effects. It’s not a if but a when.
If we look at the situation for Cyprus alone (figures from this website), we have: NPLS = €27.490 bn, GDP = €16.504 bn, thus NPLS as % of GDP = 166.57% i.e. SIXTEEN TIMES the EU overall figure (which they will never be able to pay off)! It’s bad, people. Really bad.
By implication, following any Troika-imposed plan to get the Cyprus economy back moving again is just a nonsense as whatever they suggest, it will NEVER EVER work. Any “negotiation†is just posturing to secure extra bailout money, not to actually help make the country any better.
From what I understand, the Orams case plunged a dagger so deep into the heart of the Northern Cyprus property market, the hilt was virtually coming out of the other side…
Denton: We’ve crossed swords before on “a serious of unfortunate events†or “grand design†for the situation in which we now find ourselves. As neither of us were personally in the above meeting, it is impossible for us to know. However, for every investment bubble, you need: A Seller of the Next Best Thing (the Developers), accommodating legislation to make it legal (Government); Evil Lords of Darkness to make sure you keep on the right side of the laws that your government mates make up for your benefit (Lawyers) and people to lend the Sellers enough money to not only market their product, but to provide funds for people to buy the product (Bankers). You also need a Mug Punter (that would be US). The first 4 groups need to work closely (as I think everyone agrees that here in Cyprus, they do).
To work out if this were design or default, we should look at who the principle beneficiaries of all the “mess†were i.e. the scores on the doors and who was in a position to manufacture the environment in which these dirty deeds could thrive. Have any Developers, Government Ministers, Lawyers or Bankers been: stripped of their assets, in prison, found guilty of anything and been severely chastised? In fact, have any of the above LOST a single penny? Nope, I didn’t think so. The only ones to lose out are US (and the EU, but as again discussed, EU losses due to corruption dwarf anything the Cypriot Rusfetti could ever dream of).
When you couple the above with: the lies to the British Parliament about resolving the Title Deeds issue (remember Lord North from 2008?: outrage then subdued silence…); the introduction of the “Your personal assets will not be targeted if you are a bankrupt developer†laws of 2009; the “Amnesty for building rubbish property contravening all planning permission†laws of 2011 (onus of correcting pushed onto Mug Punter); the wholesale abandonment of EU-wide lending criteria so you can lend as much as you like without checking if the customer had the ability to repay (or even bothering to collect ANY payment from your mates); the Title Deeds Scandal which enabled bankers to include in their collateral property that Developers had already sold, so they could borrow against it WITHOUT which THESE HUGE LOANS WOULD NOT HAVE BEEN POSSIBLE; the significant HIKE in lending to large developers after 2007 plus a whole lot more besides (arbitrary transfer fee increases, convoluted IPT manipulations to get the Developers off the hook again, bizarre pro-Developer court rulings defying Cyprus’ own laws etc) and remembering that there was only a small window of time (mid 2007 to beginning of 2008) when the banks were able to borrow, borrow, borrow so they could lend, lend, LEND, then, if one wishes to say it was all happenchance, unscripted chaos based on failings in Cypriot systems, then all are free to come to their own conclusions.
We may disagree on how it started, but by now, I don’t think any have much faith in how it’s going to end.
Mutley 99: “Cyprus seems to ignore the fact that the majority of ex-pats pay their utility bills on timeâ€Â.
Unfortunately, I think Cyprus knows this only too well. My initial advice to anyone who would listen, once I had word of the above “meetingâ€Â, was for Expats to stop paying any money into the Cyprus system they could get away with, in order to precipitate its collapse and bring the establishment cap in hand to the negotiating table. It seems in Cyprus, little distinction is made between the honest bloke who wants to pay his fair share as promptly as possible and the Mug Punter (hence all the new schemes to try to extract as much as possible from honest, up-front payers while the murky, dodgy fellows continue to murkily dodge).
And finally Jon Frazer: I think you may be confusing me with a certain Odd Job Klaus, whose remit I believe sounds scarily similar to the one you’ve described! Fresh from basking in the reflected glory of another World Cup win, plus the successful placing of sleeper cell munitions experts in the heart of the capital city of their greatest nemesis (i.e. the installation of the German gunners Mertesacker, Ozil and Podolski in North London: geddit?), I’m sure he’d be only too happy (in fact, I don’t think we’ll be able to stop his gloating) to tell us of his dastardly plans – well on the way to completion – of keeping southern Europe enslaved to a certain nation’s Central Bank, on the 100th painful anniversary of the first attempt.
The current foreclosure pantomime is exactly that (as no-one wants to foreclose on a worthless asset and lose the income derived from it, plus incurring costs to maintain it, so nonsensical posturing all around!)
However, I completely agree that the European Super-State dream of certain members of the Euro-elite is coming together exactly according to plan (as of course, no-one could ever have foreseen Greece leading the charge in getting into financial trouble. Again… Latin Monetary Union).
Will keep you posted on any updates from OJK. I’m sure they’ll be hilarious (in a Teutonic way, which is NOT supposed to be an oxymoron…)
@Peter, I agree by definition you must have been someone who fled to be a refugee, this is another anachronistic crazy law, those who are rightly/wrongly considered refugees due to the events of 1974 have children and grand children, great grandkids, who are considered the same, in time due to marriages etc etc all Cypriots will be refugees… how can the govt keep up with all the demands that go to satisfying the benefits that refugee status gives people…I recall they are given plots of land to build on even give cash sums of up to 50k NO TIES….or given very very low interest loans….Either way this is neither here nor there as the issue at hand, I agree to that a certain power is using he power of or illusion of money to take over Europe….
@Demetri
Actually you can’t be a refugee Cypriot in Cyprus. To be a refugee you must have fled your country in fear of your life. (Unless we are saying the North is another country)
The only true refugees here are Syrians, who I hope get the financial assistance for refugees, otherwise this would be discrimination.
I don’t want to sound like yet another conspiracy theorist – but I believe that SoOJB has been planted here by a certain northern European power (the one which tried unsuccessfully to take over the world a couple of times last century).
His remit is to deflect from the real situation by crediting the buffoons who “run” this place with a “master plan”. I would have thought that the current pantomime over the Foreclosure Bill starring our illustrious leader and deputies would have demonstrated that orchestrating such a plan was not remotely possible, as they obviously couldn’t run a whelk stall.
The southern European weakness for luxury Teutonic tinware produced by guest workers needed a market. A Cypriot friend who has visited Germany extensively over the past ten years tells me that Mercs were not a common sight there a decade ago, but are now ten a penny.
So Cyprus just slotted into place perfectly, and as far as I can see the European Super-State dream of Reding, Juncker and the Baron is coming together exactly according to plan….
All the same, a very good laugh, thanks Bob!
Be interestng to know what the data is re @Brad P
question “Are people looking to Northern Cyprus for this reason or have they boycotted the island completely?”
SOJB. Brilliantly written. Amusing but depressing all at the same time. Cyprus seems to ignore the fact that the majority of ex-pats pay their utility bills on time and keep chasing the Land Registry to pay for their Title Deeds. It’s probably for that reason that the country hasn’t sunk without trace.
There is much unrest about what the future holds, even for those of us lucky enough(?) to have secured their Title Deeds.
Give me the dates and put me down for a hundred tickets Mike, for the show at Paphos before it’s a sell out. I will lay on some coaches!!!
SoOJB superbly entertaining as always, even though the topic is grim. What a grand conspiracy! It reminds me of the wailing cry of Kenneth Williams as Caesar in Carry on Cleo: ‘Infamy! Infamy! They’ve all got it in-fa-me!’
Frivolity apart, I cannot deny that it all could have happened just as SoOJB asserts, with the representatives of the main protagonist groups plotting their dastardly deeds in a smoke-filled taverna many years ago. However, there are at least three other competing explanations that should be considered.
First, the ‘blind accident’ model, in which the Cyprus Property Scandal arose through bumbling incompetence and ineptitude on a vast scale across the activities of all the protagonist groups – lawyers, developers, banks, agents, government departments. It was mostly cock-up, not conspiracy. There was no purposeful conspiracy on a national scale, although numerous incidental examples could be found on a local case-by-case basis e.g. a lawyer colluding with a developer against the interests of his client the purchaser.
Second, the ‘evolving expedience’ model, in which protagonists learn as they go along and develop a whole series of wheezes that enable them to trouser more and more lolly from unsuspecting buyers. New wheezes may well require concerted acts and/or blind eyes by different protagonists. Conspiracies may well evolve locally between e.g. a number of lawyers, developers, agents, banks and possibly state and local government officials.
Third, the ‘incompetence plus evolving expedience’ model combines the features of models 1 and 2.
I favour the third model. This does not negate much of the content of SoOJB’s model – it just suggests that the dastardly plot evolved over years.
What a brilliant sketch!
As Mike said (below); it should be staged.
Well done SpiritOJB, very clever.
@Spirit of Odd Job Bob – how long do you think it will take for the Cypriot government to clean up the mess they’ve created?
Are they capable of towing the line and introducing necessary reforms?
And even if they get their house in order it will be at least a decade before anyone considers buying property in Cyprus again.
Are people looking to Northern Cyprus for this reason or have they boycotted the island completely?
@stevie, what goes round comes round I believe. Trust me the Cypriot system has caught more than just ‘foreigners’ with their pants down, be it the illegal car import taxes from cars in the EU, to the stupid laws that said you are given Cypriot refugee status (with all the perks this had a few years back) if your father was a refugee/and mother not, BUT if your mother was a refugee and father was not you were turned down, outrageous and sexist! there are numerous examples but it does seem that they target Brits for basically being prompt and gentleman like with their obligations…makes me sick to be honest…I say roll on Turkey, come over and finish what they started, blasphemous you may say coming from a Greek Cypriot origin person but the CY govt has well and truly with the collaboration of the banks and developers and lawyers destroyed what used to be paradise. Also the following is what I will be asking MPs , what percentage of NPLs had as security for them land owned by refugees in the occupied part of the island? and do you not see there being a risk of these properties/land ending up in the hands of Turkey? In which case problem solved there will be no land to negotiate for !
Its hard to accept that most of the Brits who bought property in the boom time had their brain frazzled by the sun (me included). Things that you would not even contemplate back in the UK suddenly become acceptable here in Cyprus. Who in their right mind would pay in full for a new build villa when no infrastructure was in place. No roads, footpaths, retaining walls or even electricity but still you hand over the full amount. You move into the property only to find that you have broken the law (Cap 22) which clearly states that a property can not be occupied until a final completion certificate has been issued. For the many of us who are still in denial we must accept that the Cypriot system has truly had our pants down.
Shocking, I am glad I left Cyprus but Euro 300k down.
Does it mean if you don’t have a title deed the property is not yours?
Some clarity on the subject of the property will highly be appreciated.
@asha on 2014/09/01 at 10:13 am – “if you don’t have a title deed the property is not yours?”
That’s absolutely correct. Until the Title Deed to the property has been issued in your name, the property is not yours.
Spot on – Brilliant, I love it!
Just one little point to make, in regard to ….”then you can still use it as collateral to borrow even MORE money from Stylios right up until the contract of sale is registered at Land Registry by the conveyancing Lawyer; which would be me”…. That is true to a point but Land Registry will not accept a Contract of Sale for specific performance unless all outstanding taxes have been cleared by the vendor and the likelihood is that the taxes will be outstanding. After all why pay them, especially if the vendor has been paid by the purchaser.
Perhaps this play could be staged at the amphitheatre in Paphos as an evening performance with the floodlit fort as a backdrop. Priceless!
Cyprus, the great illusion exists.
@ Spirit of Odd Job Bob. Indeed you are the oracle!
I totally accept the summing up of us Brits in this article – all of it!
So, in true spaghetti western style – i.e. once vicious gunfighter who has reformed provoked by evil baddies to take on one last battle – are we going to do something about it??!!