Cyprus and Global Finance
Cyprus appears to be a ’safe haven’ in the current global financial crisis. According to an editorial in The Cyprus Weekly on 17 October, the country is not facing any major problems and ’there is no indication that Cyprus will face serious problems in its banking system as such, though some difficulties may arise for other financial institutions.’
The newspaper even went so far as to suggest that Cyprus could actually benefit from the situation by developing its position as a safe place in which to do business.
The Minister of Finance, Charilaos Stavrakis, has told the Finance Committee of the House of Representatives: ’It is not an exaggeration to state that we have the safest banking system in Europe,’ giving the following reasons:
- Cypriot banks had not invested in ’toxic’ financial products.
- Banks depended on deposits of households (i.e. they were not dependent on inter-bank loans.
- Ratios of bank capital adequacy were very high.
- Operational profitability of the banks was very high.
While Mr Stavrakis has been criticised for being over-optimistic in his assessments, the paper concluded that ’at this point in time it appears that his evaluation is justified,’ adding that ’one should be comforted by the fact that Cyprus has never suffered in recession through economic causes, and usually has the flexibility in the economy to get itself out of trouble.’