WHEN it came to choosing between Scylla (a disastrous exit from the Eurozone) and Charybdis (the German crewcut), Cyprus chose to stay in the Eurozone. Whether this painful and courageous decision to save the island’s banks and its economy from total collapse was correct we shall never know.
At the present time discussions are continuing on the way forward and the banks should reopen for business tomorrow (Thursday).
Unlike countries outside the Eurozone, Cyprus was unable to devalue its currency or embark on a process ‘quantitative easing’; effectively printing more banknotes to stimulate the economy.
Since the bailout was announced, I have received literally hundreds of questions from those planning to holiday here asking if it’s safe, are there riots, will I be robbed? While those with those with property on the island have been sending me questions about their mortgage repayments and other matters.
Is it safe to visit Cyprus?
In a word YES – do not believe the stories you read in the gutter press, like the one that was recently published by “The Sun”:
“FAMILIES heading to Cyprus for Easter are being told to take plenty of euros – and try not to get MUGGED.”
The extraordinary Foreign Office advice came as the island teetered on the brink of financial meltdown.”
This is a lie; the advice from the Foreign Office says nothing about being mugged. The Foreign Office advises that visitors to the island should take “appropriate security precautions against theft.” This is the same advice it offers to British nationals travelling to many parts of the world – it doesn’t mean you should wear a crash helmet and a suit of armour when you visit the island to avoid being mugged!
My wife and I have lived in Cyprus for eleven years without any problems – and I first want to assure all those planning to visit that the island is perfectly safe – don’t cancel your holiday.
Contrary to other reports in the foreign press my wife and I, who bank with the Laiki, have been withdrawing cash from their machines and paying in shops, supermarkets and petrol stations with our Laiki debit cards.
Property and mortgages
I have received questions from many people asking if they should continue making their regular mortgage repayments to their banks in Cyprus, even though some of them are in difficulty and may not be around for much longer.
In a word, the answer is YES. Failing to maintain your mortgage repayments could result in penalties imposed by the bank for non-payment and the potential loss of the property.
Finance minister Michalis Sarris announced on state TV that alternative arrangements will be made for those with mortgages with the Liaki (Cyprus Popular) Bank.
As you may have read, the Laiki bank is to become the island’s ‘Bad Bank’ and will take over all non-performing loans. As regular readers will know, Cyprus had a unique way of classifying loans as non-performing as it did not count fully secured loans as non-performing even though they have not been serviced in 90 days.
I know that that many thousands of people, both Cypriot and foreign, were deceived into buying property built on land that a developer had mortgaged; a material fact that was concealed from them by disreputable developers, lawyers and banks.
The questions I am being asked is what will happen if the developer’s mortgage is classified as non-performing and is transferred to the Laiki ‘Bad Bank’.
I’m afraid it’s too early to say. Until the Memorandum of Understanding has been ratified by the Eurogroup and is in the public domain, no-one can say.
However, I would hope at the very least that those who have bought property with a mortgage and who are maintaining their mortgage repayments will be protected.
As well as property prices taking a dramatic tumble, commercial rents are also facing a downturn.
Many local businesses will face closure as the recession deepens resulting in many commercial properties coming onto the market. This will put further downward pressure on rents as well as prices – and if offshore companies decide to move elsewhere, further downward pressure will be put on prices of residential and commercial property as well as rents.