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Several officials have warned that Cyprus remains exposed to external risks and that unless reforms are implemented, competitiveness is boosted and public spending is kept in check, there is a danger of re-living the crisis of 2012-2013, for which the island’s vulnerable and services-oriented economy was unprepared.
For decades, foreign observers from the IMF and the international rating agencies (whom we now adore), had been warning about runaway deficits and public sector spending (civil service payrolls) that were unsustainable.
Afterwards came the ‘patriotic’ support given to toxic Greek government bonds and when the banking system collapsed under all this pressure, the state became a helpless bystander.
As a result, the haphazard way that loans were dished out left, right and centre (ideologically speaking), with mortgages spiralling through the roof and the system coming to a standstill, the European Commission is now patting Cyprus on the back saying that the rate of non-performing loans was ‘drastically’ reduced from year-earlier levels.
The NPLs will continue to haunt the banks that were to blame for handing out mortgages without sufficient collateral, while the bankers who ‘arranged’ or approved these loans have since left or taken early retirement, avoiding any prosecution or consequences, leaving the taxpayer to once again foot the bill.
It is because of the lack of real growth in the economy that these are all communicating vessels, a symbiotic relationship with fees and taxes paid into the economy, without any fundamental creation of wealth, in essence, creative accounting.
Six years on from the crisis, the current administration has been giving in to pressures for pay hikes in the public sector, regardless of productivity levels, with most civil servants still assessing themselves as ‘excellent’.
The messages from the last round of elections should have been clearer, with the ruling party playing down its tarnished image in the public opinion of being a corrupt bunch favouring the few.
Leaders of the Fiscal Council and the Central Bank, two independent ‘wise men’ whose opinions should be given greater importance, said external risks come in the form of the US-China and other trade wars that will have a trickle-down effect on the Cyprus economy.
Unless a new national strategy is devised, one that would pump money into the productive ‘real’ economy, by moving away from the passports-for-investment scheme and by refocusing on the strengths of the Cypriot workforce and regional advantages the island may have, nothing will be able to save us from further shocks.
Not even the sugar-coated dream of future natural gas revenues bailing out the economy and everybody once again dismounting their tired donkeys in order to sit in shiny Beemers and Mercs.
