It has been three years since I was last in Paphos, a resort on Cyprus’s west coast, and at first glance not much has changed.
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By Jeff Randall
6:00PM BST 22 Oct 2012
In a taxi from the airport, down a rollercoaster road of potholes and speed bumps, we drive past white-walled villas draped in bougainvillea. At the quayside of the old harbour, traditional fish restaurants continue to do steady business, as tourists gather by the castle to watch a magnificent sunset. Behind this façade of familiarity, however, the comings and goings have been so dramatic that many in Cyprus are struggling to understand what has happened to them. Important features of local life have, literally, disappeared – and I’m not talking just about thousands of feral cats that used to reside here.
This island, once a magnet for money, is perilously close to running out of cash. Standard & Poor’s, the ratings agency, has downgraded Cyprus twice since the beginning of August, citing “deteriorating domestic credit conditions and eroding consumer and investor confidence”.
With an election due in February and fears of a lurch to the left, a local café owner admitted to me that property buyers from overseas, many of them British, who in the past had been “robbed”, would be foolish to rush back.
Evidence of plunging fortunes is everywhere, with billboards offering two-bedroom apartments, originally priced at €150,00 (£122,000), now €79,000. In the shopping zone close to Paphos’s more expensive hotels, there are several boarded up premises, scarred with graffiti, where bars and car-hire companies used to flourish.
Things are so bad that some individuals, owed money by the government for appropriation of their land, have begun sending in the bailiffs to seize state assets. Only last week, seven vehicles owned by various departments, including the land registry, were grabbed and whisked away for auction.
The government insists that it’s about to embark on talks to secure a bailout before a summit of eurozone finance ministers in mid-November. There is an expectation, perhaps unduly optimisitic, that it will be able to whistle up €10bn from the so-called troika – the International Monetary Fund, the European Commission and the European Central Bank – to rescue Cyprus’s banking system, the floorboards of which collapsed when Greece went bust.
In the grand scheme of credit-crunch angst, the sum required to stabilise Cyprus is less than a rounding error compared with what it is going to cost the European Union to prevent Spain from being dragged out of the corrida like a skewered bull. For Mrs Merkel, the paymaster general of Europe’s lost causes, it’s little more than the loose change in her Handtasche.
The intriguing element of Cyprus, however, is that what’s at stake extends way beyond vulgar economic considerations. The politics of this place are complex, as befits its Byzantine past.
Cyprus is in the eurozone but barely in Europe. Israel and Syria are about 300 miles from Nicosia; Brussels and Paris are 1,800 miles away. Turkey is an ever menacing presence, with its unrecognized regime in the north of the island. Hostility looms large.
Then there is Russia, with which Cyprus shares an orthodox church. While Paphos’s feline vagrants were being rounded up for extermination, big bears moved in to fill their places on the sunbeds. The newcomers are easy to spot, thanks largely to a sartorial style originated by Englebert Humperdinck’s costumier and watches the size of grapefruits.
The number of Russians visiting Cyprus has tripled in three years to more than 400,000 and many do not intend to go back. The official estimate of Russian residents here is about 50,000 but double that seems nearer the mark. Aside from the appeal of an agreeable climate and a low tax rate, the Russians’ penchant for cash transactions prompts widespread suspicion that the island is becoming a giant laundromat for red-hot rubles. Cypriot authorities deny this.
The Russians’ location of choice is Limassol, a 45-minute drive from Paphos, where there is a Russian-language newspaper, a Russian-language radio station, two Russian-language schools and enough prostitutes from former USSR states to keep the Red Army tied down, as it were, until Christmas.
Cyprus’s financial predicament is dire. Its public-sector wage bill is, proportionately, the eurozone’s highest. There is, according to EC representatives, a “huge gap’ between income and expenditure. Pensions and benefits have run out of control. Yet, as it passes round the hat, Nicosia is desperate to find an alternative to the kind of troika-designed austerity that’s being imposed on Athens but who can afford to help?
Step forward, Mr Putin. The Russians are offering cheap loans, prompting Cyprus’s Moscow-educated leader Demetris Christofias to claim this is “support without anything in exchange”. He is either deluded or dissembling. Not even Putin’s closest friends would pretend he is in the free-lunch business.
The Russians, quite correctly, view Cyprus as a convenient backdoor to the European Union – and they are not alone. The Chinese have also started arriving, encouraged by what they regard as an incredibly low bar to immigration. Forget all those tricky visa forms, for anyone prepared to spend €300,000 on a property in Cyprus there is the bonus of eligibility for permanent residency. Once this is achieved, the owner is entitled to move anywhere within the EU. For the price of a shoebox in Shanghai, Cyprus is offering a gold-card travel pass and much more besides.
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