Since it acceded to the EU in 2004 and the Eurozone in 2008, Cyprus has gone on a phenomenal binge with dizzying bubbles: a bank-deposit bubble goosed by foreign money and offshore “financial services,” a stock-market bubble, a massive property bubble…. Now the banks have collapsed, the offshore “financial services” have been eviscerated, the property bubble crashed, the construction sector is in ruins, as are many developments, and the stock market is down 98%!
A recently released Eurozone-wide study, conducted under the auspices of the ECB, determined that in 2010, at the cusp of the crisis, Cypriot households were the second richest in the Eurozone. Median household wealth of €266,900 was over five times higher than that of German households. Average household wealth reached a phenomenal €670,900 (that’s $872,000!), just shy of Luxembourg’s €710,100. For details and graphs on how the 17 countries stacked up, read…. Total Fiasco: Germans are the Poorest, Cypriots the Second Richest in The Eurozone
This extraordinary wealth is why everyone, including central banks and governments, loves bubbles, no matter what or how.
Until they blow up. Then the handwringing starts. Every bubble in Cyprus has blown up. And everything has changed. Just how much is in the numbers. In March, for example, new vehicle sales plunged 58.9% from last year. It parallels many other statistics. But what is Cyprus like, beyond the numbers?
So I received a long, sort-of post-apocalyptic email from one of my sources in Cyprus. He is an expat who has lived there for many years. He loves it there, and has no intention of leaving. His words said more than a thousand numbers. And I want to share the first part:
Quiet … EMPTY … If you want to make a deal opening a shop of some sort, you can pick and choose amongst prime locations. The time is now, if that is your inclination, and if you have the financial staying power, or a concept for selling things people can’t do without, something cheap! Every second shop, ah OK, maybe every third or fourth, is closing down.
Except LIDL, a German supermarket chain which is booming; it is able to sell goods cheaper than most others. Especially after the biggest Cypriot supermarket chain, Orfanides, suddenly went bankrupt and closed its doors. This happened some month before the crash. A riddle to me how such a business could go bust. And a sign of the total incompetence of the owners.
Streets are empty. Few people around. Cash is king, and if you appear to have cash (I do), one gets treated like I haven’t seen in the years that I’ve been here. Tourists are essentially absent. There are some sporadic ones, but few. The weather is blessed. After 10 years of scorching heat and drought, it finally rains, and the sun shines, so everything is green and fresh.
Agriculture should be able to expect bumper crops – if it still existed today. But most agriculture was shut down during the years when every second Cypriot became a “property developer.” The others became accountants, tax advisors, hoteliers and restaurateurs, or bordello owners. Or just lived in leisure from the proceeds of property sales.
Isn’t it absurd? When the Gods smile, crops thrive, the weather is splendid – the basic stuff – people should be happy. But they are not. The mood is subdued. It has slowly dawned upon the Cypriots that the game is over! Where they’ll get the additional 5 billion from? Only God knows.