We have noted that last week the international statistics of the Greek economy, have been downgraded, causing a lot of concern to the Greek people, as well as to the eurozone. The Greek economy has dropped from the one fast developing economies in the eurozone, to the near bottom of the eurozone, due to the global economic recession and bad management from the recent local Government(s). It appears that in Greece there are no reliable statistics and every Government prepares its own to suite voters and public opinion. However the eurozone members do not trust Greece any more, notwithstanding the fact that the new Government has taken seriously on board the whole situation (the pressure from the E.U. apart).

In an effort of unity, E.U. leaders pledged confidence in the Greek economy, but that is one thing and another what it will actually happen in the immediate future. What is worrying for Cyprus, is that the 3 local (Cypriot) and another 3 locally based Greek banks, in their effort to draw funds, they must offer higher deposit rates to depositors. This will mean that the local Cyprus depositors will be lured towards this situation and ask for higher deposits in Cyprus and hence higher lending rates. This will bring a further blow to the local/ Cypriot and Greek banks, who will restrict further their lending and increase the local borrowing rates. Our own (Cypriot) Government has just decided to help local Banks cash deposits by distributing €3 bil. to local banks and Co-Ops in analogy of their business. This scheme however may go up in the air if what we have predicted comes true, since some local and Greek Banks might direct their share of the €3 bil. at low cost to their Greek operation, in order to get higher lending rates in Greece etc.

Without being particularly sympathetic to the Greek economy, this is what global economy does for you. A similar situation (not to such an extent however) appears to be emerging in the U.K. with similar results from interested U.K. buyers (higher deposit/lending rates etc will reduce demand for holiday homes abroad from the U.K. including Cyprus), whereas the Irish economy is not yet outside the woods.

The Cypriot Central Bank Governor, has announced that property prices have decreased during the year 2009 by 8%, whereas his predictions for next year is that prices will keep steady. What a mess our dear readers, since here we are (Cyprus) thinking that we have found a solution to most of our economic problems and we are affected by other countries. The major factor in such situations is the confidence/non confidence that people feel in their economy. Holiday home is not only a large investment for most people, but also it refers to deposits/savings that come from resources that have been collected in the past. For this reason such investors are very worried of such a situation, especially bearing in mind the increasing of unemployment and reducing income. What is more worrying is G. Brown’s proposal to tax the “Golden Boys”, by 50% on their bonuses. Bravo to Gordon Brown for his courageous move, since he has a global (not only U.K.) support. The same people who have driven the global economy in the red, are now threatening the U.K. Government that they will leave their country and reside abroad (increase in U.K. demand for Channel Islands tax heavens by 18% over the last few months), leaving the Government without experienced people (please-please what a joke).

We, in Cyprus, are not without our Golden Boys. Top Bankers get similar salaries around €200.000 p.a. (plus and plus) and bonuses of around €500.000 each in total. This unreal income is not in accord by Cyprus standards and to this end we note to their benefit that a number of these Golden Boys have given up their bonuses (an example to be followed by their non-Cypriot counterparts?).

What a mess indeed, with 6% of the local population being unemployed (20% in Spain and 10% in the U.K.) and so on. So at the end of the day do the Golden Boys have such power to blackmail Governments and the economy of each country? It appears that they have, but it needs the guts of Gordon Brown to at least attempt to put matters in some sort of prospective and address the public opinion on this, bearing in mind that the most (U.K. at least) Banks are owned by the Government in terms of majority shares. Greece is now following G. Brown’s example by taxing these bonuses by 90%!!

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