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30 Apr 2017 Exec summary Sapienta Country Analysis Cyprus

The following is a shortened version of executive summary in the monthly, in-depth Sapienta Country Analysis Cyprus. For more about Country Analysis Cyprus visit here. For subscription options, visit the subscription page  Political analysis and outlook: With presidential elections due in early 2018, expectations for a solution of the Cyprus problem are low, and with Turkey reacting to offshore gas drilling, risks to political and economic stability are rising. Structural reforms and natural gas: Contracts for the third gas licensing round were signed in April amid warnings to companies form Turkey. Plans for a commercial court are afoot but healthcare reform and Cyta privatization remain contentious. Fiscal performance and forecast:  Public debt rose slightly in 2017 but for debt-risk management reasons. We expect another debt issue this year but the timing is uncertain. Historical fiscal data have been revised. Banking sector: Privatization of the Cooperative Central Bank could be challenging for a number of reasons. Loan demand is on the rise again although bad loan workouts mean that the debt stock continues to fall. Macroeconomic trends and forecast: Tourism arrivals have been robust despite a slowdown from the UK. Inflation is eating into disposable incomes. The impact of the citizenship scheme is beginning to show up in FDI...

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16 Apr 2017 Why are SME bad loans rising?

Banks made good progress during 2016 in cutting bad loans. By the end of the year, the stricter category of non-performing exposures (NPEs) had fallen year on year by €3.1bn to €24.2bn, while non-performing loans (NPLs) on a more than 90 days past due (90+ DPD) basis had declined by an even larger €3.8bn. This produced an NPE ratio of 46.2% and an NPL ratio (90+ DPD) of 33.9%. Under rules set by the Central Bank of Cyprus, banks are now implementing a range of measures to work out bad loans and prevent new ones from appearing. However, hidden behind this overall positive trend is something a little puzzling, namely that bad loans among small-and medium-sized enterprises (SMEs) have been rising. NPEs rose year on year in December by €812m to €9.97bn. Read full article...

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31 Mar 2017 Turkey’s next moves over Cyprus and gas

Last week, Turkey’s Ministry of Foreign Affairs issued another statement about offshore hydrocarbons exploration in the Cyprus Exclusive Economic Zone (EEZ). Turkey has been issuing statements since 2004, when the Republic of Cyprus (ROC) first delineated the EEZ. For reasons I shall explain below, the latest statement has been keeping me awake at night. Read full article here

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26 Mar 2017 What’s behind the EU-Cyprus budget spat?

On Tuesday, Finance Minister, Harris Georgiades told state radio that the Eurogroup meeting for eurozone finance ministers had accepted his position on the government’s budgetary policy. While there was no specific reference to Cyprus in the official Eurogroup statement by the president, Jeroen Dijsselbloem, he did say that during the meeting they had “followed up on the implementation of the budgetary plans” (of all member states). Dijsselbloem added they would “take stock again on the implementation of the budgetary plans” in May, on the basis of the European Commission’s Spring forecast. Read full article...

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12 Mar 2017 No solution – no UN and no gas?

Efforts to solve the Cyprus problem are dying fast. In an interview with Kibris on Monday, the UN Special Advisor, Espen Barth Eide said something that should wake everyone up on this island. Translated back from the Turkish, he said: “If the process fails, I have the feeling that it will not be possible to expect the UN to come again after a couple of years when things improve and give it another try. I don’t know. This is why I am worried. I would be more worried if I were living here. I hope I am wrong but I have to say that I am worried it will not be a smooth exit.” This is diplo-speak for: “If you don’t come back to the table, don’t expect the UN to try again”. Read full article...

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04 Mar 2017 Updating Cyprus’money-laundering record

Just over two weeks ago, Transparency International published a report called “Top Secret Countries Keep Financial Crime Fighting Data to Themselves”. Transparency and good preventive practices are important because money-laundering cases are difficult to prove. The Magnitksy case, for example, has been open in several jurisdictions for years (although the UK never opened a case on the matter) and despite Cyprus and other jurisdictions co-operating together on it through Europol, to date no one has even been charged, let alone convicted. Read full article...

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