Gordon Barlow

http://www.sovereignman.com/trends/o...-effect-12272/

This from Sovereign Man website, dateline yesterday, saying that capital controls are still in place. Is this a fair report, zygi?

zygiman

Yes Gordon, capital controls are still in place. Some restrictions have been lifted, for some foreign banks mainly middle eastern , Barclays and a Russian bank.
They are worried, that once restrictions are fully lifted, there will be massive capital flight. They are not mistaken. The money will flow out of the country.

There is no trust in banks anywhere in the world now really, and people are looking for investments outside the banking system.

Gordon Barlow

http://www.marketoracle.co.uk/Article41388.html
Here is an interesting summary of the situation, by John Mauldin. Seems a fair comment to me, Zygi; what do you think?

Prometheus1

Everybody is waiting for the restructure of Bank of Cyprus, Cyprus' biggest bank.

Hopefully this will happen by the end of July 2013.

After that, and with an expected haircut of savings in this particular bank, of about 47-48% (for deposits over EURO 100,000 per person) the bank will come out of administration, and most of bank restrictions (in all banks in Cyprus), will be lifted.

However, in order to avoid any panic amongst the people, which may lead to a collapse of the Cypriot banking system, the restrictions are most likely to be lifted in stages, gradually, so that the Cypriot banks will start regaining the people's trust, and go back to normality.

zygiman

People in Cypurs are now allowed to open a bank account, provided that this account is a new fixed term deposit created with funds from cash, provided that the amount to be deposited exceeds €5,000 and the term of the new fixed term deposit is at least 3 months.
The new fixed term deposit cannot be terminated prior to its maturity

Prometheus1

That's right Zygiman.

That was the 19th government announcement, which gradually lifts off the restrictions imposed in March to prevent panic amongst people, which may have had detrimental concequences on the Banks and hence the Cyprus Economy.

As I predicted, the final "haircut" for the uninsured deposits in the Bank of Cyprus was 47.5%. In exchange, people who lost their money, will get shares of the new Bank, which has merged with Cyprus' second largest bank too, the Laiki Bank (Popular Bank), and can even be at the Bank's Executive Board, managing the new Bank of Cyprus

Prometheus1

As for the Cypriot Economy, is gradually stabilising, although still recovering from the immense shock in March, where the newly elected Cypriot president, gave in to pressure from leaders of the other European Union countries, and accepted the haircut of the deposits.

It must be said, that by doing so, the Trust to the Cypriot government, as to the Cypriot Banking Sector, and the Cypriot financial system, was destroyed within a night.

Unemployment is on the rise, many people have loans that they cannot pay and are in danger of losing their houses or properties, and generally the island is going through a period of recession.

However, its people are very "tough", and I am sure will work hard to bring prosperity back to the island in the near future.

Prometheus1

Finally, something for those who are thinking of moving to Cyprus.

Although the country is going through recession, and may not be the best place right now to create a new bussiness, if you are thinking of buying, let's say, a retirement home, this is the ideal place and time to do so.

The property prices have been reduced by about 30-40%, compared to 2-3 years ago, and as the place is quite small, undoubtely, the prices will rise again after 2-3 years, when the economy recovers.

Gordon Barlow

From Zero Hedge. There is a chart of the Unemployed in Cyprus, but I can't copy and paste it. The link is http://www.zerohedge.com/sites/defau...805_cyprus.jpg

It seems very doubtful that the economy will ever bounce back to where it was. How could it, when the tax-haven sector has been utterly destroyed?
The brief Zero Hedge article follows here:

With PMIs picking up across Europe, the nations' 'leaders' are spreading the good word that the worst is over (again) and its all sunshine and unicorns from here. But it's not. As Cyprus' Anastasiades glibly comments on small improvements in their capital controls - amid collapsing deposits, bluntly ignoring the reality of a record implosion in the nation's home prices, the facts for the man on the street are dismal. The number of jobless people in the smallest EU nation jumped 32% year-over-year to its highest in the 19 years data has been collected.

[The current number of unemployed Cypriots is five times its pre-crisis levels!]

The ever-idiotically-optimistic IMF predicts unemployment will peak at 16.9% (with Cyprus unemployment standing at 15.9% in Q1 already) and 13% cumulative contraction in GDP and it seems there is little light at the end of the tunnel for the average Cypriot (even as the Cyprus stock index has risen 4% in the last week).

zygiman

Cyprus unemployment has reached 48,000, equating to 31.7% of the workforce, at the end of July. September will be a crucial month, with Ayia Napa, the busy young resort on the East Coast, will begin to close down, followed by the other resorts.
The small trickle of tourist revenue will dry up, and more people will be unemployed.

Prometheus1

Zygiman,
So that we do not confuse people, I do not think that the newspaper article in Cypriot newspapers said that 31.7% of the island's workforce is unemployed.

I think what it said, and please correct me if I am wrong, is that there has been a 31.7% increase year-on-year on the island's unemployment figures. At the moment it stands at about 48,000 people, which is about 15% of the workingforce.

The major problem, is that this figure is on the rise, and the government seems unable to stop this, but we will see what happens.

Prometheus1

I also agree that as soon as the summer and the tourist period are over, there will be many more unemployed people in Cyprus.

Really sad for the people living in this, otherwise, beautyful island.

zygiman

Yes, i stand corrected, you are right. You also have to count in illegal workers who are not registered and are now also unemployed.

Prometheus1

Not just that Zygiman, but also there are many Cypriots who are unemployed but are not officially registered, and there are lots of them.

You see many Cypriots are quite proud and they find it very humiliating, to go and register for job seeker's allowance.

athensman

Cyprus unfortunately is following into the same pathway that Greece has been through over the last few years.
This pathway leads to nowhere. It is based on completely wrong economics, and results in deeper and more prolonged recession.