According to the findings of the latest Eurobarometer 63 per cent of Cypriot respondents said that their standard of living had fallen in the last five years (EU average was 45 per cent) while 33 per cent said that it had not changed. Sixty-nine per cent of people over 55 years of age saw their living standard fall while 39 per cent said they occasionally had difficulties paying household bills at the end of the month.

There was not much optimism either that the situation would improve in the near future, with 67 per cent believing that things in the country were moving in the wrong direction; only 11 per cent thought they were heading in the right direction. Meanwhile 43 per cent felt their standard of living would decline further in the next five years while 37 per cent believed it would not change. Just over half of respondents thought the state of the economy would worsen and a third that it would remain unchanged.

These low expectations and negative sentiments are understandable, as in the last two years most countries have been plagued by high inflations rates – caused by the thoughtless expansion of credit during the pandemic – which were boosted by soaring energy prices triggered by Russia’s invasion of Ukraine. Interest rates were increased in order to control inflation, further reducing most people’s disposable income and living standards, which always suffer in an economic downturn.

Bringing inflation under control has been the priority of the ECB because it is the only way of protecting living standards. Until this objective is attained there is economic hardship for people as well as for businesses, but there is no painless remedy for inflation. Subsidies of basic consumer goods and of energy, which the government imposed, have not stopped the decline of living standards, as the Eurobarometer findings would seem to suggest. In Cyprus the inflation rate for this year is forecasted to be about 2.5 per cent, which is manageable, but it remains to be seen whether interest rates would be reduced by the ECB in the second half of the year.

High interest rates also affect housing loans, which makes the purchase of a home more difficult, especially for the young. Unaffordable housing may be one of the reasons two thirds of Cypriots feel things were heading in the wrong direction. Property prices in Limassol, for example, have become unaffordable for Cypriots, but it is a consequence of the town’s economic success. The arrivals of many foreign businesses, which have made Limassol a thriving city, have pushed up rents and house prices and it would appear the same will soon be happening in Larnaca as well.

This is a problem which may have influenced the way people see the future, but people will find ways of dealing with it. We should bear in mind that the influx of foreign professionals living and working here has helped the Cyprus economy get through a difficult couple of years relatively unscathed, still recording respectable growth rates. Gradually, living standards will also start rising again.