International Rescue Needed for Cyprus? – Proposals

The Cyprus Property Action Group (CPAG) has written an open letter to the Cyprus Mail.

Remember the Informer Editorial on “Cyprus Government will have to write off Cyprus Bank Debts“?

Well following the many articles that we have published since about the failing Cyprus Economy and the shenanigans in the Cyprus Banks (What is going on in the Cyprus Banks?), CPAG has found that the Eire Government also has problems with market exposures to property developers and the Eire Banks.

In Ireland the government has turned to the international money markets with a semi commercial scheme before it falls into the same case as Greece.

CPAG says that Cyprus should adopt the same approach as the Irish government, which was faced with the spectre of massive toxic debt in the banking system, due to the Irish banks’ reckless lending to their developers to the tune of around €80bn; on properties which have since seen their asset values’ plummet and remain largely unsold.

The newly established National Asset Management Agency (NAMA), an Irish Treasury agency, has started to buy developer debt at only 70 per cent of the book value – so this is not a bailout for the banks. The developers will not be forgiven any debts, as NAMA has more power than the banks to seize and sell-off properties in the event of developer default – so this is not a bailout for the developers.

And this is not a burden on the taxpayer, as NAMA plans to make a profit on its activities which are expected to take 10 years to complete. The EU has also sanctioned the programme.

Clearly, funding will have to be raised on the international markets for such a venture, but the longer the Cyprus Government dithers the greater the amount to be raised due to developers’ ongoing failure to service debts.  At the same time, the lower Cyprus’s credit rating sinks the greater the premium will be on any funding.

But with a coalition government with exits and rumblings that seems unlikely.

Cyprus will soon be in the same boat as Greece unless positive action is taken.  It means admitting there is a big problem in Cyprus right now which no one wants to face.  When the crisis is revealed it will be too late to use commercial business means which will be costly in many,many ways.

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