Cyprus Mail
CM Regular Columnist

Homing in on property

By Hermes Solomon

IT SEEMS that our central bank might finally resolve the liquidity problems of the Bank of Cyprus by announcing a 50 per cent haircut on deposits over 100,000 euros and splitting the Bank of Cyprus into a ‘good bank’ (purely a village retail operation) and a ‘bad bank’ for bankrupt property developers and loan burdened borrowers (a real estate or asset management operation).

Evidently, the ‘bad bank’ will go the way of Laiki, which ‘failed’ catastrophically under the previous government. Laiki was taken on by an unwilling Bank of Cyprus, which changed Laiki shop signs only to shut those branches down immediately thereafter, although ATMs at some are still operating normally, demonstrating that there isn’t a coherent plan or method in anything we do other than to hold off telling employees the ‘horrible’ truth from the start.

The bad news comes in dribs and drabs, doomed to drive us down a cul-de-sac irreversibly. Loans must, and will, eventually be repaid in one form or another, no matter superficial ranting and raving by political parties and ETYK!

Rather than forcing both banks into administration simultaneously last March, banksters fiddled to the point where nobody, not even the central bank governor, really knew what was going on.

Keeping the people in the dark is our way of doing business in all walks of life whether legal, job creation, dismissals, disclosures or criminal investigations.

That malignant cancer of total and absolute distrust in our politicians, lawyers and property developers has finally infected our banks, which were the cause of the cancer in the first place – evil is the love of money for its own sake!

Who in their right mind will invest another penny here? Certainly not ‘henge’ funds as DISY’s leader, Averoff Neophytou calls them, which he anticipates will auction off insolvent property owners’ bricks and mortar to ‘bloody foreigners’ for a song, making a fat profit in the process.

The troika and this government seek to attract foreign capital and investment onshore, without which Cyprus will never exit bankruptcy. By foreclosing on indebted householders and selling off their homes to foreign investors for a half of their former market value, we are enriching our treasury and freeing our Bank of Cyprus ‘asset management operation’ of their moral obligation towards the seriously indebted.

And it’s for this reason, amnesties or not, individuals are removing their wealth stealthily from the island.

By 2010 there was far too much liquidity floating about unsupported by ‘real’ collateral – real purchasing power. Irresponsible lending and the buying of beleaguered Greek bonds, combined with the sheer greed and dishonesty of the elite, led to the worst economic collapse ever known by any economy. There was so much borrowed money spent and so little repaid; spent without concern for a tomorrow we were told would never come.

Tomorrow is now here and today belongs to the past. Pay up or shut up shop, this is our government’s and the troika’s formula after months of prevarication, their initial objective being to remove liquidity from the system. This they have managed to do with resounding success; without the dosh hands are tied, stomachs empty and you do exactly as you are told.

But for richer family members who choose to help their indebted children, there is a way to beat capital controls.

As soon as any term contract matures, break it up into contracts of a month’s duration not exceeding 5,000 euros, and preferably in two or more names – husband and wife joint deposit accounts for example!

On maturity a month later, deposit the lot into various bank current accounts then transfer up to 15,000 euros into the indebted current accounts of your offspring.

This modus operandi can be repeated ad infinitum thus employing existing ‘internal’ funds to save the homes of your children rather than have them kicked out, move back in with you and live off pitiful state welfare handouts and see their 400 sq metre concrete palace that they ‘sweated’ all their young lives for on borrowed money auctioned off to a ‘bloody foreigner’.

And I do mean bloody in the sense that money-crazed vultures abound in this society of dog eat dog and the devil take the hindmost, which was, up until 2010, the sweetest of places inhabited in the majority by the nicest of people, who made the mistake of believing that they could borrow as much as they liked without a second thought; told at the time to trust in our banks, ministers of finance and bomb disposal expert president.

The alternative for richer family members is to recommend their offspring emigrate and to send them up to 5,000 euros monthly from many different bank accounts, since most of us began moving funds and opening secondary or more bank accounts as soon as former minister of finance, Charilaos Stavrakis said, “The world economic crisis will not noticeably affect Cyprus”, he, a multi-millionaire, believing in all naivety that Cyprus was not part of the world.

And he has been proved partly right, ‘cos we certainly don’t seem to be a part of the EU, never mind the world, given the harsh manner in which the troika have treated us, and nobody else, thus far.

BTW, those of you with large land/property estates might also consider increasing the number of owners on title deeds, thus considerably reducing the amount of Immovable Property Tax (IPT) payable by mid-October, namely legal tax avoidance rather than simply theft, which is an art in itself exclusively the domain of our self-serving, illustrious and blameless elite.

Property is only worth as much as you can sell it for, hopelessly indebted borrowers now experiencing crippling negative equity. On what basis will IPT assessments be made given the present catastrophic fall in values?

Kicking those that are down is not the answer to this island’s economic woes. Returning liquidity to the marketplace is. Without it, the economic outlook for the average family is worse than bleak.

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