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Cyprus: parking on pavements and money-laundering

16 February, 2013

**Why the two are connected**
Opinion By Fiona Mullen, Director Sapienta Economics Ltd
In the past few weeks I have been at first puzzled, then disturbed, then shocked at how the German media have portrayed Cyprus as awash with the proceeds of organised crime and tax evasion from, as they put it, “Russian oligarchs”.
Perhaps it is because I spent my undergraduate years (before I got the economy bug) reading 18th century German classics. I thought that the German media would somehow report to a higher standard than the British or Cypriot media.
Well, Goethe’s influence is long dead, it seems, and the worst of the German media practise the same dark arts as the rest.
The media journey normally goes something like this: a reputable newspaper reports on an issue and does the right thing by balancing the accusations with adjectives like “alleged”, “perceived” and so on.
Since the journalists are properly trained in libel, the report also adds the counter-arguments or denials of the accused party.
Then the “gutter press” gets hold of the story, drops the adjectives and counter-arguments (you can get away with that when you are accusing an entire country), finds billboards in Russian on Limassol highway, posts pictures of Christofias looking uncannily like Brezhnev (Das Bild) and the accusations stick like toffee on suede.

Why the accusations resonate
But we cannot just blame the journalists. Populist newspapers are popular because they write about things that resonate with the general public. This is where the pavements come in.
Last year over 140,000 Germans came to Cyprus on holiday. They are the second largest tourism market after the UK and, yes, you’ve guessed it, Russia.
What did they see? Blue skies, blue sea and ... a lot of posh German cars on pavements. Add to that the speeding, jumping of traffic lights and other pastimes of Cyprus-dwellers (I would be lying if I pretended that I have not fallen into similar bad habits) and you can see why our north European guests go home with the lingering feeling that Cyprus might have laws for all kinds of things but it does not enforce them.
So when the government protests that, based on the Financial Action Task Force (FATF) and MoneyVal reports (albeit produced at different times), it has a better legislative compliance record than Germany, that according to the Basel Institute on Governance, Cyprus is less at risk of money-laundering than Germany, its protests fall on deaf European ears.
Now, if you live here you know that it is a bit more subtle than that. Yes, people do park on pavements, but they tend not to block exits, they might fall behind on communal fees but will pay up if you prod them politely (preferably in Greek). And they do pay their taxes, even if they accidentally on purpose forget to declare every last cent.
So yes, it is a Mediterranean culture, but laws are bent at the margins. It is not as bad as, well, you can guess which country west of here I am thinking of.

What can we do about it?
So how can we change these perceptions that Cyprus is a hotbed of criminals?
Trying to change the habits of pavement-parkers is probably not the way, not at least until we have decent bus services and cycle paths.
But another reason why the accusations stick is the attitude towards accountability. And here, I think, we can do something.
Since moving here over 11 years ago, I have witnessed the stock market scandal, the Milosevic scandal, the Helios crash, the Mari blast and what I suspect is a mis-selling scandal for retail buyers of the convertible bonds.
But even when these cases go to trial, I can’t help feeling that no one is ever really brought to account. The instinct of the elite is to protect their own, rather than make an example of them and thereby protect the little guy.
Perhaps if someone had been brought to book for the bad old days in the 1990s, when Cyprus certainly was a dodgy tax haven, if someone had had to pay for lending money to people to invest in their bank’s inflated shares, if someone had been called to account for busting UN sanctions, if the Helios verdict in Cyprus had been different, if the president had at least had to answer difficult questions in parliament about the Mari blast, then maybe our north European neighbours would have believed us when we said that we are not a centre for money-laundering.
I hope that the past few weeks has shown even the elite that this protective instinct is now a liability, not just for Cyprus’ reputation but for the economy’s ability to grow and create jobs again.
If we are ever to clamber out of this mess, then whistle-blowers will need to be protected and heads will have to roll.