articles | 14 April 2013

Raft of new measures introduced to aid Cyprus economy

The government is to ease citizenship rules for foreign investors who lost money under an EU bailout deal, as part of a series of planned measures to salvage what it can of its reputation as a business centre.

President Nicos Anastasiades said new steps, mostly affecting the Russian business community, would be approved at a cabinet meeting. Speaking at a Russian business conference in Limassol on Sunday evening, Anastasiades said the new measures would “mitigate to some extent the damage” Russian investors had endured.

In exchange for a €10bn rescue package, agreed by the EU and IMF, Cyprus must wind down Laiki Bank and write-off a large portion of secured debt anduninsured deposits in the Bank of Cyprus. Russians have billions of euros in Cypriot bank deposits, and some could lose up to 60% of their savings under a ‘haircut’.

Anastasiades said foreign investors who held deposits prior to 15 March, and who lost at least €3m would be eligible to apply for Cypriot citizenship. And the existing “citizenship by investment” programme will also be revised to reduce the amount of investment required to be eligible from €10m to €3m. The president said he would drop requirements for citizenship applicants to keep €15m in Cypriot banks for five years, saying they would be allowed immediate access to their money. “These decisions will be deployed in a fast-track manner,” Anastasiades said at the Global Russia Business Meeting.

In his speech, the President said he was confident that Russian businesses would not leave the country despite the banking turmoil and any losses they may have suffered. “Cyprus is neither a money-laundering hub nor a tax haven,” he said, adding: “What saddens me deeply - and I refrain from using the word angers - is that since the Eurogroup agreement was reached, some EU partners’ businesses and companies involved in the financial services industry have been preying upon our financial services sector, in order to encourage a re-allocation of funds into their economies. “Ironically, their governments claim that these funds were deposited and invested in Cyprus through money–laundering activities. This is obviously an absurd paradox,” Anastasiades remarked.

The two-day conference was held at the Four Seasons Hotel in Limassol. Organised by Horasis, it was hosted by the Cyprus Investment Promotion Agency (CIPA). Attending were hundreds of senior business and government officials from several countries. Keynote speakers included Igor Manylov, Russia’s Deputy Minister of Economic Development and Mikhail Kuzovlev, Chairman of the Board of JSC Bank of Moscow and Chairman of the Business Council for Co-operation with Cyprus.

Meanwhile the government is working on a raft of steps designed to reboot the economy in the wake of the massive restructuring of the country’s banking sector. The policies are being framed by the cabinet which convened for almost five hours yesterday and will continue deliberations today. According to commerce minister Giorgos Lakkotrypis, a top priority is the immediate launch of development projects. Such projects would include the construction of marinas and golf courses, an energy centre and a technological park, as well as a focus on renewable energy sources such as photovoltaic units.

The labour ministry yesterday put forward a number of proposals to curb unemployment, including: subsidised employment programmes; granting state land to the unemployed for farming; coming down on illegal employment; removing unemployment benefits to those who reject three job proposals; introducing a scheme to employ 3,000 workers in the hotel industry; and extending the period that hotels remain open. 

Other employment proposals include: extending business hours for shops and companies; reducing working hours and salary; targeted vocational training; and a reduction in vocational training subsidies which currently stands at €8 per hour. According to state broadcaster CyBC, the ministry also proposed measures to reduce the cost of benefits provided mainly to foreigners in Cyprus, by replacing much of the amount with coupons, food and clothing while also introducing income criteria. 

The package of measures is expected to be announced later this week.


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