This little missive is coming to you from Cyprus.
I’ve only been here a few times, but I’m starting to like the place. The bottom half of the island is Greek – the northern half is under Turkish occupation – but it seems to be working out fairly peacefully for everyone.
And like a lot of places in the Mediterranean, you can feel the ancient history of the place. It’s literally written in the walls. And when you look at where Cyprus is on the map – you can see why it’s been a focal point of history.
And I’m wondering if it’s about to become a key focus again.
Because Cyprus is actually killing it right now. The economy and place seems to be pumping. The mood is up and there’s a buzz about the place.
And when you put it alongside Greece, it really does seem like a miracle of some sort.
Because when the GFC hit, Cyprus looked like it was on the ropes. Cyprus’ second biggest bank, Laiki collapsed, and depositors with more than €100,000 were bailed in. It was another victim of easy money. When creditors went in, they said the bank had suffered from ‘managerial tourism’ – that is, managers went all over the world and just bought all sorts of random assets.
A large exposure to Greece didn’t help either.
And unable to prop up their banking sector, the government also had to go cap in hand to the ECB, and had to submit to similar austerity measures imposed on Greece.
But that’s the thing. In Cyprus, it kind of worked.
And by that I mean, by 2016, they had repaid the money they received in the bail out, and we’re on the up and up again.
Partly that might be about how austerity was implemented here. There are two ways you can balance the budget as a government – cut back on spending or increase taxes.
In Greece there was strong opposition to cutting spending, and so the government tried to ramp up the taxation take. It wasn’t incredibly effective.
But in Cyprus they went with spending cuts – particular with wage cuts and job losses in the public sector.
I’m generalising, both countries were doing both things, but in Cyprus they were able to go hard on spending, and leave more money in people’s pockets.
But the other thing that Cyprus has going for it is more ancient – it exists as a bridge between Europe and Asia, and it has stepped fully into that role in recent times.
And by that I mean, Cyprus is part of the EU. So for a while now it’s been a favourite destination for Russian oligarchs to park their money and access the European financial system.
And, like a lot of other countries, Cyprus is in the business of selling citizenship.
And I don’t mean in like in a shady, back-door, brown envelope kind of way. I mean in an official policy kind of way.
Like, there are literally signs at the airport:
Some one I was talking to was saying that this ‘Golden Visa Program’ has made over €5 billion so far and accounts for a massive 25% of the Cyprus GDP.
That must make it its biggest export earner by far… or maybe Tourism comes close. Still. It’s huge.
And you are starting to see the effects of all the money coming in. (A 12.5% corporate tax rate probably doesn’t hurt either.)
I was looking at one real estate development here (can’t help myself). I think it was called Trilogy or something. Anyway, prices there are about €15,000 a square metre. So for a 100sqm apartment we’re talking €1.5 million.
Sounds a tad expensive right, by Aussie standards. But remember that the average wage here for locals is just €1500 a month.
So this thing obviously isn’t targeted at locals.
That’s not an isolated development either. There’s also the ‘One’ luxury apartment development in the sea-side town of Limassol. When finished next year, that will be the tallest seafront tower in all of Europe!
What’s more, the City of Dreams Mediterranean casino resort will soon be the biggest casino in Europe.
As I said, pumping.
I’m looking at this and wondering if Cyprus might be positioning itself very cleverly. It’s part of the EU empire, with all the trappings that brings, but it also has a long and deep connection with the Middle East and beyond.
Maybe we’re looking at the next Dubai..?
Might be time for Jon to have a bit of a dabble*…
(*Not investment advice.)