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Fitch upgrades Cyprus to investment grade

Fitch Ratings has upgraded Cyprus’ sovereign rating to investment grade, ‘BBB-‘ from ‘BB+’, with a stable outlook as the island expects a 2.7 per cent fiscal surplus this year and continuous growth that will boost receipts.

The upgrade followed similar action by Standard and Poor’s last month.

Finance Minister Harris Georgiades took to Twitter to thank everyone for their contribution.

“Forging ahead,” he added.

Fitch said the upgrade reflected the buoyant fiscal revenue and prudent fiscal policy, which will see Cyprus record a fiscal surplus of 2.7 per cent of GDP in 2018, compared with a target of 1.7 per cent in the April 2018 Stability Programme Update.

“We forecast the fiscal surplus will remain high at 2.4 per cent and 2.2 per cent of GDP in 2019 and 2020, respectively, compared with 3.1 per cent and 2.9 per cent targeted in the 2019 Draft Budgetary Plan. Robust economic growth will boost fiscal receipts, while previously adopted hiring freeze and collective agreements will likely limit growth in the wage bill.”

The rating agency said the island’s public debt will remain on a firm downward trajectory despite a one-off expected increase this year following the placement into Cyprus Cooperative Bank (CCB) of €3.19bn in government bonds (15.5 per cent of GDP) to facilitate the acquisition of part of the state-owned bank by Hellenic Bank.

The move will raise the debt to 104.4 per cent at end-2018 from 95.7 per cent in 2017.

“However, we expect large primary surpluses, robust growth and contained nominal effective interest rates will reduce GGGD/GDP to 70 per cent of GDP by 2027.”

The ratio of non-performing exposures (NPEs) to total loans fell to 40.3 per cent in the first half of the year from 44 per cent in 2017, partly supported by the announced securitisation by Bank of Cyprus (BoC) of €2.7bn gross NPEs.

The acquisition by HB of CCB’s good assets and the subsequent transfer into a run-off entity of CCB’s €5.7bn NPEs portfolio are estimated to have led to a further decrease in NPEs to 30 per cent in September 2018.

“This will support a substantial decrease in contingent liabilities stemming from the banking sector, although these remain large.”

Private sector debt and non-performing exposures remain high, however, at 226 per cent and 97 per cent of GDP in 1Q18, respectively, and constrain credit growth.

Household and corporate debt stood at 105 per cent and 121 per cent of GDP and a large part of the recent decline in such debt stemmed mostly from high GDP growth, debt-to-asset swaps, loan write-offs, rather than loan repayment.

“We expect private sector deleveraging will accelerate, however, as enforcement of new legal amendments, improving earnings and recovering house prices foster debt repayment. Economic growth will likely remain resilient to a faster resolution in NPEs as rising wages, a dynamic labour market and high household savings will help preserve disposable income and smooth consumption.”

Source: CyprusMail

Residential prices index rises for eight quarters

 

The increase of residential property prices remains moderate the Central Bank of Cyprus (CBC) has said as the residential property price index in the second quarter of 2018 marked eight consecutive quarters of growth.

In the second quarter of 2018, the residential property price index, compiled by the CBC (houses and apartments) rose by 0.3% with the index of house and apartments rising by 0.2% and 0.7% on a quarterly basis.
 
On an annual basis the residential property index rose by 1.7% in the second quarter of 2018.
 
Prices in all districts rose with the exception of Pafos which registered a marginal reduction of 0.2%
 
“The real estate sector in Cyprus follows a positive course. The prices show increase which are however moderate except from certain areas,” the CBC said.
 
The CBC says that residential property prices in Limassol especially in apartments showed significant increase for five consecutive quarter notably in the coastal areas where price growth is the largest compared with all other areas of Cyprus.
 
The CBC attributes this significant rise to the fact that Limassol is the most densely populated district in Cyprus, the operation of the Cyprus University of Technology in the city centre, demand for apartments from Airbnb, the construction of the marina and the decision of the government to operate the island’s main casino in the city.
 
The CBC also said price increase in Limassol are affected by the purchases of residential property by foreigners in the context of the Citizenship by Investment Scheme, noting however that these purchases are not financed by the banking system and are not factored in in the CBC residential property index.

Furthermore, the CBC warned over a possible rise in supply of mainly commercial real estate due to the reform in the legal framework governing foreclosures, insolvency, loan sale and the approval of the law on loan securitisation which may lead to the reduction of non-performing loans in Cyprus but may lead to an increase in supply or real estate property.

 

Source: Stockwatch

Blue Air offers rescue fares to some Cobalt customers

Blue Air, the low-cost Romanian airline, has stepped in to offer some Cobalt customers rescue fares after Cobalt unexpectedly suspended operations last night.

The airline is offering a selection of reduced fare flights for a limited time to customers who are traveling between October and March and who have a canceled flight reservation.

They are offering rescue fares on the following routes: London (Luton) - Larnaca and Larnaca - London (Luton), Larnaca - Athens, Thessaloniki - Larnaca, Larnaca - Thessaloniki, Athens - Larnaca routes. Prices including taxes start at 69 EUR, one way, to/ from Athens and Thessaloniki and from 99 EUR, one way, to/from Luton(Luton).

The rescue fare is subject to both seat availability and terms & conditions - further details here:
Blue Air: Cobalt Rescue Fares

Cobalt posted a statement on its website late last night confirming it was ceasing operations:

"Cobalt regrets to announce that it will be canceling all flights as of 23:50pm on October 17, 2018 due to indefinite suspension of Cobalt’s operations.

 

As a result, future flights or services provided by Cobalt will be canceled and will no longer operate. Passengers who have un-flown tickets are instructed not to go to Larnaca Airport or any departure airport tomorrow, 18 October 2018 as no Cobalt flights will operate and no Cobalt staff will be present.

For refunds, please contact your credit card provider or Travel Agent.

We sincerely apologize once again and would like to thank our very loyal customers for their support over the last two years of Cobalt operations."

The transport ministry said in a statement that passengers expecting to fly with Cobalt on Thursday should secure one-way tickets in economy class from another airline, and keep their receipt for their reimbursement.

Passengers expecting to travel with the airline for the seven days following Thursday will be informed promptly about travel procedures, the ministry said.

It was not immediately clear how many passengers would be affected, but nine flights had been scheduled to arrive and further nine to depart at Larnaca airport on Thursday.

 

Source: NewsinCyprus.com

Cobalt flights grounded from midnight

Cobalt airlines, the largest Cyprus-based airline, was expected to ground its flights as of midnight on Wednesday, after reports said that the company failed to reach a deal with a potential European investor.

According to Economy Today, the company has only €15 million its accounts, which are expected to be used to pay the employees.

The transport ministry told the website that they are on standby to ensure that no passengers are affected by the issue.

In statements on Wednesday night transport minister Vasiliki Anastasiadou said she could neither confirm nor deny the news the airline was heading towards closure.

But she said: “Without having any legal obligation, we will of course ensure that we help the passengers.”

Anastasiadou added that the ministry is expecting official information from the airline on Wednesday night, and that they will release a statement following the company’s statement.

All of the airline’s flights for Wednesday are expected to arrive as scheduled with the last one coming in to Larnaca International Airport from London’s Heathrow at 12:10am, according to the Hermes airport’s website.

Calls to Cobalt’s 24/7 customer service centre from both their local number and their number for individuals that are abroad went unanswered.

In early October rumours began circulating that the budget airline was facing cash-flow problems after two of its aircraft were grounded for two days, causing delays to certain flights.

Reportedly, the reason was that Cobalt had not paid the monthly leasing fee to the American company that owns the two planes.

The company posted losses for the year 2017, while in May this year the airline sacked its CEO Andrew Madar.

According to local media, earlier this week the Air Transport Licensing Authority (part of civil aviation) summoned Cobalt officials to a meeting.

Civil aviation has been monitoring the airline for some time but reports said that to date the airline has been consistent with all its payments (salaries, etc) as well as with its aircraft maintenance obligations, while its flight operations are unaffected.

Officially, Cobalt has declined comment. But sources within the company attributed the liquidity problems to a difficulty by Chinese investors to export capital due to Chinese government restrictions.

The airline’s main stockholders are AJ Cyprus, holding 49 per cent of the shares. AJ Cyprus is owned by Chinese Avic Joy Air.

The airline employs around 200 people.

Cobalt stepped in to replace bankrupt Cyprus Airways, which shut down in January 2015.

The low-fare airline began operating in 2016. Its fleet consists of two Airbus 319s (144 seats) and four Airbus 320s (156 seats).

In 2018 the airline flew to 23 destinations.

Source: CyprusMail

Government to continue work to consolidate sustainable development

President of the Republic of Cyprus Nicos Anastasiades assured Thursday that Government will continue to work with the same determination and responsibility to consolidate sustainable development of the economy and to boost the excellent prospects of Cyprus’ main productive sectors, in his speech at an official dinner of Cyprus Employers and Industrial Federation.

He also said that upgrading of research and innovation issues under a Deputy Ministry, would significantly contribute to the necessary modernization of the sector.

The President of the Republic expressed the need to improve governance in the field of research and innovation and reminded that the Cabinet decided to establish the National Council for Research and Innovation and to adopt the institution of the Chief Scientist, with the aim to encourage innovative entrepreneurship.
 
In addition, President Anastasiades announced that within two weeks he intended to invite his fellow candidates in the last presidential elections to cooperate in order to achieve a series of reforms, taking into account the proposals that they had submitted.

As he said, 26 of the proposals in the programs of his fellow candidates were feasible, as well as 56 others that were common between all candidates.

Referring to the reforms that the government was planning the President said that they would lead to the enhancement of the competitiveness of Cypriot businesses and would create an even more attractive environment for domestic and foreign investment.
 
Among the reforms mentioned by the President are the establishment of an e-Justice system, the implementation of National Health System from 1 June 2019, the promotion of reforms in the Public Service related to recruitment, evaluation and staff development, the promotion of eGovernment, the reform of Local Government, and the implementation of a Tourism Strategy.
 
Referring to the banking sector, the President said that the Government, in full compliance with strict supervisory, transparency and compliance rules, had
achieved a significant consolidation of the sector and a healthier basis for capitalization, liquidity, profitability, loan approvals and restructurings. He also stressed the reduction in non-performing loans (NPLs) from € 28.4 billion to less than € 12 billion.
 
The President also said that he was expected a more rapid response to the problem of NPLs, after the recent expansion of the Insolvency Framework, the improvement of the effectiveness of the legislative framework and the promotion of the “Estia” Scheme, to protect the main residence.
 
He also said that the establishment of the Asset Management Company, to manage the NPLs and other assets of the Cyprus Co-operative Bank, was a new important source of public revenues arises that would makes public debt absolutely viable.

 

Source: Stockwatch

Government to continue work to consolidate sustainable development

President of the Republic of Cyprus Nicos Anastasiades assured Thursday that Government will continue to work with the same determination and responsibility to consolidate sustainable development of the economy and to boost the excellent prospects of Cyprus’ main productive sectors, in his speech at an official dinner of Cyprus Employers and Industrial Federation.

He also said that upgrading of research and innovation issues under a Deputy Ministry, would significantly contribute to the necessary modernization of the sector.

The President of the Republic expressed the need to improve governance in the field of research and innovation and reminded that the Cabinet decided to establish the National Council for Research and Innovation and to adopt the institution of the Chief Scientist, with the aim to encourage innovative entrepreneurship.
 
In addition, President Anastasiades announced that within two weeks he intended to invite his fellow candidates in the last presidential elections to cooperate in order to achieve a series of reforms, taking into account the proposals that they had submitted.

As he said, 26 of the proposals in the programs of his fellow candidates were feasible, as well as 56 others that were common between all candidates.

Referring to the reforms that the government was planning the President said that they would lead to the enhancement of the competitiveness of Cypriot businesses and would create an even more attractive environment for domestic and foreign investment.
 
Among the reforms mentioned by the President are the establishment of an e-Justice system, the implementation of National Health System from 1 June 2019, the promotion of reforms in the Public Service related to recruitment, evaluation and staff development, the promotion of eGovernment, the reform of Local Government, and the implementation of a Tourism Strategy.
 
Referring to the banking sector, the President said that the Government, in full compliance with strict supervisory, transparency and compliance rules, had
achieved a significant consolidation of the sector and a healthier basis for capitalization, liquidity, profitability, loan approvals and restructurings. He also stressed the reduction in non-performing loans (NPLs) from € 28.4 billion to less than € 12 billion.
 
The President also said that he was expected a more rapid response to the problem of NPLs, after the recent expansion of the Insolvency Framework, the improvement of the effectiveness of the legislative framework and the promotion of the “Estia” Scheme, to protect the main residence.
 
He also said that the establishment of the Asset Management Company, to manage the NPLs and other assets of the Cyprus Co-operative Bank, was a new important source of public revenues arises that would makes public debt absolutely viable.

 

Source: Stockwatch

NASA's chief scientist to come to Cyprus

NASA`s Chief scientist James Green will be in Cyprus next week to take part in an International Space Summit organised by the Cyprus Space Exploration Organisation (CSEO). 

On the occassion of his visit, a series of activities will take place organized by the US Embassy in Nicosia such as a lecture at the University of Cyprus and visits to schools.

CSEO President George Danos said that it is an honour for Cyprus to welcome NASA`s chief scientist for the International Space Summit, organized by CSEO as part of its continuous efforts to place Cyprus on the space map.

`In cooperation with the US Embassy the opportunity wll be given to the wider public to see and hear close up this leading scientist`, 

The International Space Summit will take place on October 15-19. During their meetings in Cyprus, they will discuss and decide the future of Mars space missions as well as international cooperation. The summit will be attended by top-level scientists, such as the Chief Scientist of NASA James Green, the Director of Space Research Institute of Russia, the Minister of State of Advanced Sciences of the UAE, and other top officials and scientists from Europe, India and China.

The NASA official will also attend the local NASA Space Apps Challenge that will take place in Nicosia 20-21 October,
mentoring the teams during the competition. CNA acts as an official media sponsor of the competition.

 

Source: Stockwatch

Cyprus’ golden visa scheme exposes EU ‘to the corrupt’

Cyprus is high on a list of EU countries red-flagged in a damning international report on Wednesday suggesting its golden visa programme in spite of recent ‘cosmetic’ controls, as it stands, remains at risk of “exposing the EU to the corrupt and the criminal”.

 

The joint report by Global Witness and Transparency International said that programmes run by some European Union countries to sell passports and residency permits to wealthy foreign citizens pose risks of money laundering as some of the schemes are not properly managed.

Such schemes are currently applied in 13 EU countries: Austria, Cyprus, Luxembourg, Malta, Greece, Latvia, Portugal, Spain, Ireland, Britain, Bulgaria, the Netherlands and France. Hungary has terminated its programme.

According to the report, titled ‘European Getaway – Inside the Murky World of Golden Visas’. Cyprus’ citizenship-by-investment marketing says the island offers “the quickest, most assured route to citizenship of a European country”.

“The statistics seem to support this,” the damning report said. “Cyprus’ passports-for-sale scheme is the most prolific of its kind in Europe, with 3,300 foreign nationals having secured EU passports since 2013.”

It added that prior to the programme’s revamping in 2013, ministers granted Cypriot citizenship on a discretionary basis, in a less formal arrangement. Cyprus has earned a whopping €4.8 billion from its scheme. Cyprus, with a cost for a passport of up to €2m has the potential to attract €1.4 billion annually, which represents about 7.5 per cent of the country’s current Gross Domestic Product (GDP) levels, according to the report.

Analysis of the schemes offered in Cyprus, Malta and Portugal, it added, shows the ways in which “insufficient due diligence, wide discretionary powers and conflicts of interest” could open Europe’s door to the corrupt.

“Specifically, we found that Cyprus and Portugal, in spite of recent reviews and changes in their programmes, do not seem to take into account an applicant’s source of funds or wealth when analysing applications,” said the report.

It said the Cyprus government had acknowledging the existence of “problematic cases” and unveiled a set of reforms in August this year.

The reforms doubled the length of time for assessing applications and introduced an annual cap of 700 on the number of passports for sale. Also, private sector agents are now accredited by and answerable to the Supervision and Control Committee.

These agents are named on a public register and obliged to abide by a code of conduct that requires them to submit a “report of the findings of due diligence review” for every individual they support for citizenship.

“Indeed, so concerned was the government about protecting its reputation, that it created a new code of conduct banning agents from referencing the “sale of passports” or from using the EU symbol or pictures of passports in their marketing material,” the report said.

However according to the two international groups, there is continued cause for concern, particularly as some of the reforms seem to be more cosmetic than substantive.

For example, it remains unclear whether the cap on applications applies only to main applicants or includes dependents. “If the former, the cap of 700 applicants is somewhat disingenuous, for the number of main applicants since the scheme’s establishment has never been higher than 503 a year, a number that is far below the new cap”.

The report also says it remains to be seen if the Supervision and Control Committee will be given the independence, resources and mandate to rigorously apply the code of conduct and to pursue violations. Moreover, while agents appear to be under greater scrutiny, it remains unknown if applicants themselves have been subject to enhanced due diligence, it added.

In May 2018, it was reported that the government would be bringing in agencies that specialise in identifying money laundering to review applications. As of August 2018, however, there has been no confirmation that the government will conduct its own independent and in-depth due diligence checks or take any steps to verify the source and legitimacy of an applicant’s wealth. “This leaves open a critical gap,” the report said.

“Despite their shortcomings, these new changes represent the long overdue recognition that the scheme may have exposed Cyprus and the EU to risky individuals. To prove that their reforms are not mere cosmetics, the Cypriot government must ensure that applicants are subject to enhanced due diligence as a matter of course.”

The two groups said the government must not rely on banks or agents alone to conduct this critical work and that Cypriots, and other EU citizens, deserved to know whether individuals who were successfully naturalised through the scheme prior to August 1, 2018 pose risks to the EU. They call on Cyprus to review past cases and revoke such citizenships if warranted.

It was revealed last year that recipients of Cypriot golden visas included, according to Wednesday’s report,  “a veritable ‘who’s who’ of the super-rich of Russia, Ukraine, China, Saudi Arabia and Iran.

Amongst them were the Ukrainians Gennady Bogolyubov and his former business partner Igor Kolomoisky, who together founded PrivatBank and were its largest shareholders until its nationalisation by the Ukrainian government in 2016.

“The fact that this oligarch duo successfully secured Cypriot citizenship broaches the question of whether there had been any red flags in 2010, and if so, whether the government’s risk appetite was such that it had been willing to overlook them,” the report said

“Now that the pair find themselves in court, the next question is whether Cyprus will consider revoking their status, should they be found at fault.”

Oleg Deripaska was also mentioned. The Russian oligarch was granted Cypriot citizenship in 2017, even though his application had allegedly raised questions, at least in the early stages.

According to the report, Deripaska was asked to resubmit his application due to the results of a preliminary inquiry into his affairs in Belgium. The inquiry was dropped in 2016, and his application for a Cypriot naturalisation succeeded.

“The fact that American authorities revoked Deripaska’s US business visa in 2007 on the grounds of alleged ties to organised crime in Russia did not seem to have weighed in on the [Cypriot] Council of Ministers’ decision. But will they change their minds now that Deripaska has been sanctioned by the US Treasury?”

“If you have a lot of money that you acquired through dubious means, securing a new place to call home far away from the place you stole from isn’t just appealing, it’s sensible,” Naomi Hirst of rights group Global Witness told Reuters on Wednesday after the report was issued.

She urged the European Union to set standards for managing the schemes and to extend anti-money laundering rules, applied so far to banks or gaming firms, to all those involved in the visa-for-sale industry. The European Commission is expected to publish a report on schemes in EU countries by

According to Reuters, EU states generated around €25 billion in foreign direct investment in a decade from selling at least 6,000 passports and nearly 100,000 residency permits, the report said using what it called conservative estimates.

“Poorly managed schemes allow corrupt individuals to work and travel unhindered throughout the EU and undermine our collective security,” Laure Brillaud, anti-money laundering expert at Transparency International, told the news agency.

Source: CyprusMail

 

Green light for private individuals to build desalination units

The cabinet has approved a guide for the creation of small desalination units by private individuals to help meet the needs of large water consumers such as farmers, hotels and golf courses, Agriculture Minister Costas Kadis said on Tuesday.

It also agreed to set up a committee consisting of officials of competent ministries which will assess applications.

These desalinations units could help meet water needs of groups of farmers, hotels, golf courses, water parks and other businesses affected by the drought.

Kadis said the guide provides for a “flexible and swift procedure” so that the completion of the entire process does not exceed one month.

There has been interest already, Kadis said, expressing hope that that “by improving the water balance, we will improve our ability to address the problem.”

He added that it is this expressed interest by the private sector that prompted the government to introduce a procedure providing the possibility for the creation of small desalination units.

“We want to grant permits to everyone who expresses interest so that the operation of these units starts before the next summer season.”

The minister said that a large delegation, including him, technocrats from his ministry, business people and representatives of farmer associations will head to Israel next week to discuss policy matters on water management and learn about new technologies concerning both saving water and cutting-edge desalination units.

“It is with these technologies we want to make Cyprus’ system as effective as possible,” Kadis said.

The guide provides for the creation of desalination units with capacity up to 1,500 cubic metres (1.5m litres) daily, Kadis said. It also specifies in which areas they can be installed as well as the quality of fresh water they must produce for irrigation purposes and for use in waterparks.

Since 2008, four desalination plants have been built in the government-controlled areas which can produce a total of 220,000 cubic metres of water daily, covering the supply needs of Nicosia, Limassol, Larnaca and Famagusta.

According to information from the Water Development Department, the construction of a desalination unit in Paphos is on the cards and is expected to be operational by the end of 2019. The unit’s capacity will be 15,000 cubic metres per day.
The existing units have been constructed on Build, Own, Operate and Transfer (BOOT) contracts.

Source: CyprusMail

Households and businesses continue to be highly indebted

 Cypriot households and businesses continue to be highly indebted despite the decline in debt levels, according to a report released on Tuesday by the Central Bank of Cyprus.

According to the report, the debt of the non-financial private sector reached 226.6%  of GDP at the end of March 2018, down from 240.3% in the previous quarter.

Debt ratios of households and non-financial corporations show a gradual decrease to 104.7% and 121.9% of GDP respectively at the end of March 2018, compared to 109.4% and 130.9% of GDP respectively, at the end of December 2017.

The net worth of households declined to 108.7% of GDP in the first quarter of 2018 compared to 109.8% in the fourth quarter of 2017. This ratio is still below the corresponding average the euro area (148.5%) in March 2018.

The net worth of non-financial corporations to GDP is negative and decreased to 107.5% at the end of March 2018 from the level of 114.4% at the end of December 2017.

 

Source: Stockwatch

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