Life after the Fall – Part 1: The Aftermath of the Cypriot Banking Collapse

Published on Spiegel Online International, by Ralf Hoppe, April 02, 2013 (Photo Gallery).

Cypriots are paying a high price for the collapse of their banking system. A leading lawyer, a real estate broker and a bar owner have already begun the process of searching for a future — for themselves, their companies and their country … //

… A Heavy Burden:  

Normally, on a day like this, Nakis Dimitriou would at some point open his tavern on a ridge near the village of Pyrgos. He would greet the musicians, give the cooks and waiters their instructions and look forward to a wonderful evening of rebetiko folk music and revenues of a few thousand euros. That was what it used to be like. In his tavern, Dimitriou only hired live musicians, the best and most beautiful singers and bouzouki virtuosos. He borrowed money to buy an expensive sound system with a mixer console and foldback speakers for the stage, but now that the crisis has forced him to close the tavern, the loan has become a heavy burden.

“People are holding onto their money,” Dimitriou says. “I still pay rent, in the hope of being able to open again — and then create a place where there is music. It was my lifelong dream.”

A tavern owner, a top attorney and a real estate broker — to understand what happened and what the future holds for Cyprus, it’s important to understand the lives of these men. Their stories reflect the history of the island, its rise and its sudden crash.

The three men have never met. Each one had his own life plan. The one thing they have in common is that their dreams, like those of so many others in Cyprus, are currently being dissolved.

Cyprus has managed to dodge a bullet, just barely, but at a high price. The country’s second-largest lender, Laiki Bank, will be broken up. Small investors and savers with deposits of less than €100,000 ($128,000) will be spared and their accounts will be transferred to the Bank of Cyprus. But those with accounts worth more than €100,000 could lose everything above that amount. Customers of the Bank of Cyprus will also feel the pain. Their accounts will be frozen, although the details are still being worked out. One thing is clear: A lot of money is about to disappear.

Neocleous’s firm, for example, has accounts with the country’s three largest commercial banks. It has about €15 million in accounts with Laiki Bank, and significantly more with the Bank of Cyprus. Neocleous estimates his total loss at about €30 million.

Run by Criminals: … //

…  Visit to “Limassolgrad”:

Unemployment in the Greek part of the island has risen from 6.8 to 14.7 percent in the last two years. Youth unemployment was 28.4 percent in 2012. Garbage is still being collected and service stations still have gasoline, but many places no longer accept checks and credit cards.

Only the Russians are still spending money. In the tourist center and port city of Limassol, nicknamed “Limassolgrad,” they sit at the “Maxi,” one of the many topless clubs, or at the “7 Seas.” Another establishment, the “Dolce” on the beach promenade, is scheduled to reopen soon. The Dolce used to charge €1,000 to rent a sofa near the dance floor for an evening, champagne included, says Loizou. He had his bachelor party there. “The party is over,” he says. On the other hand, it’s possible that the crisis will just bring down the sofa rental price.

The broker sits in his Land Rover, driving past the dream houses of Limassol. First, there is the Twin Towers luxury residential complex on the promenade, with a bridge to the beach so that residents don’t have to cross the street. Then there is a row of villas on one of the prettiest sections of the beach: 14 houses, each with about 400 square meters (4,300 square feet) of living space, complete with copper-clad facades and tropical hardwoods. Most of the houses are finished, but not all. Prices have dropped and construction is on hold, says Loizou. Then he drives through Yermasoyia, a neighborhood of luxury homes where the wealthy Russians live.

“Of course we have millionaires from Russia who are settling here, but no billionaires. They go the French Riviera. We get millionaires with assets of between two and 10 million, but now we’ve noticed that there is a limit to Russian involvement.”
The fourth stop is the Hyper Tower, a futuristic, five-story office building. Each of the 815-square-meter floors is empty and ready for occupancy. Loizou has had to adjust the appraisal value of the building several times. “First it was 90 million, then 40, then 30 and now it’s 11,” he says. But it still hasn’t been sold. He shakes his head.

“What exactly has happened?” he asks. “And what happens next?”
(full text).

Part 2: What Next for Cyprus?

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