The 2012–2013 Cypriot financial crisis was an economic crisis in the Republic of Cyprus that involved the exposure of Cypriot banks to over-leveraged local property companies, the Greek government-debt crisis, the downgrading of the Cypriot government’s bond credit rating to junk status by international credit rating agencies, the consequential inability to refund its state expenses from the international markets and the reluctance of the government to restructure the troubled Cypriot financial sector.
On 25 March 2013, a €10 billion international bailout by the Eurogroup, European Commission (EC), European Central Bank (ECB) and International Monetary Fund (IMF) was announced, in return for Cyprus agreeing to close the country’s second-largest bank, the Cyprus Popular Bank (known as Laiki Bank), imposing a one-time bank deposit levy on all uninsured deposits there, and possibly around 48% of uninsured deposits in the Bank of Cyprus (the island’s largest commercial bank). A minority proportion of it held by citizens of other countries (many of whom from Russia), who preferred Cypriot banks because of their higher interest on bank account deposits, relatively low corporate tax, and easier access to the rest of the European banking sector. This resulted in numerous insinuations by US and European media, which presented Cyprus as a ‘tax haven’ and suggested that the prospective bailout loans were meant for saving the accounts of Russian depositors. No insured deposit (Guaranteed by the Cyprus Central Bank) of €100,000 or less was affected.
At the height of the Eurozone sovereign debt crisis, Cyprus became the fifth EU member state to request a financial assistance package from the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF) – collectively known as the Troika. One of the smallest nations in the EU, Cyprus fought hard to bounce back from the brink of bankruptcy through intense negotiations with its lenders, while at the same time undergoing presidential elections and a change of government.
The key objectives of the programme after the bail out were the structural reforms and the fiscal adjustment measures aimed at restoring the macroeconomic imbalances and creating conditions for sustainable growth, full employment and the restoration of market confidence. The banking sector was the third main area of focus of the programme.
The Central Bank together with its Troika partners instigated a wide range of solutions and objectives and a severe agenda of tackling bank debts and recapitalisation, laws on restricting overspending in government institutes reduction in bank lending and branch networks with an objective to collecting rather than loan, helped the economy and by 2015 the Cyprus economy returned to modest economic growth, after three years of contraction, reflecting the progress in implementing the economic adjustment programme.
Today the economic growth in Cyprus will accelerate even more in 2017 and 2018, University of Cyprus’ Economic Research Centre said, significantly upgrading its previous projections issued in July. In the November Economic Outlook, the ERC said the Cypriot economy will expand with 3.6% and 3.3% in 2017 and 2018 respectively compared with 3.0% and 2.7% in the respective Outlook of November.
Today The ERC also upgraded its projections for economic growth in this year’s third and fourth quarters, now projected to reach 3.6% and 3.7% compared with 2.9% and 2.8% in the July projection.
A number of factors have resulted in the economy exceeding the European average growth figures. In respect of the property market sales in October 2017 increased to overseas investors by 65% as reported by the dept. of lands & surveys. In percentage terms Famagusta district which is one of the best holiday resort ares led the way with an increase of around 130%. During the first 10 months of 2017 property sales have risen 45% to the overseas market and by 6% to the local market.
The dramatic increase in the tourist market will undoubtedly help Cyprus’s growth even more. The Government body Cystat announced that arrivals of tourists reached 406,870 in October 2017 compared to 357,194 in October 2016, recording an increase of 13.9%. “October 2017 had the highest number of tourist arrivals ever recorded in Cyprus during the specific month” Cystat noted.
“For the period of January – October 2017 arrivals of tourists totalled 3,408,473 compared to 2,974,412 in the corresponding period of 2016, recording an increase of 14.6% and outnumbering the total arrivals ever recorded in Cyprus during the first ten months of the year” it said. One of the main reasons has been the shift of tourism away from troubled Countries where there have been terrorist threats.
Another factor has been the passport program In a recent analysis of citizenship by investment schemes carried out by Professional Wealth Management, part of the Financial Times group, Cyprus was assessed to be the leading European country.
The study covered twelve countries, five of which are in the Caribbean region, four in Europe, two in the Asia-Pacific region and one in the Indian Ocean. The schemes were assessed on the basis of seven criteria: freedom of movement, standard of living, minimum investment outlay, residence requirements, ease of processing, speed of processing and due diligence.
The overall leader was Dominica, largely on account of its low investment level and requirements for citizenship. The Cyprus scheme ranked seventh overall, and first in Europe, ahead of Malta, Bulgaria and Austria.
On 3 January 2018 Cyprus and Saudi Arabia signed an agreement for the avoidance of double taxation with respect to taxes on income and for the prevention of tax evasion.
Cyprus is an ideal location as most people speak the English language. All business dealings are usually conducted in English. There are extremely low rates of tax on businesses. Pensioners only pay a flat rate of 5%. With the sun shining 300 days a year it is an idyllic location and one where it is fairly easy to set up a low tax business, individual trust funds and with its numerus tax treaties a great place to have a second home or business. The best area to look at is the east coast of Protaras, where people buy villas for investment to rent out periodically and use for themselves during holiday periods. A spend of only €300,000 on a property gives you residency which in time can lead to citizenship. For a much higher investment you can obtain passport ‘s in less than 3 months for the whole family.