When the present president was elected, he announced that he is a communist. Of course those of us who know the Cypriot communist party, it is far from being a truly communist party, but more of an old socialist party (similar to the old labor party in the U.K.). The Government has “inherited” from the previous one a budget surplus of €700 mil., only to end up after only 2½ years with a €4 bil. shortfall.

Giving handouts to just about everybody (including local millionaires and not needy), awarding jobs not necessarily to the “best tender”, indecision and the constant preoccupation of the president by the political situation, are some of the reasons why the Cyprus economy has ended up from a top rating to a position near the bottom. This is especially serious since Cyprus, being one of the financial worldwide centers, the rating of its economy and its banking institutions play a very important role.

Cyprus has been warned by the E.U. that it must put its finance right by the 15/12/2011, otherwise the Cyprus economy might be placed under the E.U. supervision, with the latter placing all sorts of measures in order to support Cyprus financially. As a temporary measure the “Communist” president of ours has managed to borrow €2½ bil. from Russia, admittedly at very low interest rate (4½%), but this amount will last only up to mid 2012. There is a lot of talk between the political parties, unions and the commercial community how to handle the situation and only this week we have seen some light of agreement in the dark tunnel. During these difficult times the Communist/Socialist attitude of the Government has surpassed the hardest communist regimes in the world, by refusing to tax the civil servants, but now that we are running out of time, it has changed its mind to an extent, but insisting at the same time to tax just about everybody else. All sorts of Marxists ideas are now placed forward, ignoring the fact that Marx views which might have been right years ago, do not necessarily apply today.

So and coming back to real estate we have now an increased property tax (be it not much) starting from 1.1.2012, selective high net worth real estate revaluations in order to increase the values (it applies mainly to hotels, large office/commercial buildings etc not so far to private individual projects), new tax on land which benefits from zone changes (our idea) and taxation of unused development land (our idea). We say our idea, since it is, but these were submitted years ago during the good old times. Taxing everybody during a recessionary time will only make things worse since people just do not have the money to pay. An example in hand is the Greek situation where it has been noted that every time the Greek Government increases the taxes, it collects less than before.

What is amazing and notwithstanding the ideology of an “old socialist” government when it had to address development economic questions, as well as political issues, the idiology of the Government come up. We cry for help from the U.S. for our political problem yet and against their advice (U.S.) we established an embassy in Cuba. The civil servants themselves offered to have a reduced entry scale salaries yet the “party” did not agree. Pensions and social benefits have gone up by 49% over the 2½ years, but, then we have no money now.

The situation of a country’s economy is not something which affects all others other than oneself. Banks will have financial difficulties themselves, it will cause then to increase the interest rates, it will reduce the lending amount considerably, reducing thus the trade/business circle, it will make lenders much more aggressive towards their loan collection etc etc, causing more problems especially in the real estate industry. At the end and out of this gloomy picture that we have provided here is one hope. The Government’s termination of its period, which will be within the next 1½ year.

In concluding we will say the Mari explosion was followed by an open, public investigation. Once this Government time is up, we must suggest another investigation in order to ascertain who and to what extent is to blame for the state of the economy that we are in. From our part, letting go 15% of our staff, hurts and it makes us angry and we “need” the medicine of justice. We must examine in detail the whole past route of the economy, if anything, so as not to have the same mistakes repeated.

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