By Alexander Apostolides on December 15, 2009

We should all get free hand free phone devises from our car insurance provider.

Yesterday i saw four accidents in Nicosia. Three of them had the markings of a "i was not looking because i was on the mobile phone". We have all seen those drivers who have their one hand on the phone while speeding in very narrow streets. Heck if we are honest we have all done it, at least once. Maybe it is your boss or it might be the school of your child - you feel like you do not have any other choice than to answer your phone even when driving.

The cost of such accidents is very large. Since they are resolved with the help of the police, the minimum cost of an accident is the cost to repair the cars as well as the wages of at least two policemen for two hours. If the insurance premium is 130 euro, then the cost of an accident, even if they are just bumps on both cars far exceeds it. There is also the cost of getting caught by a policeman talking on the phone while driving: 84 Euro and 3 points on your licence.

So what i am suggesting is for car insurance companies to provide free wireless earpieces to all its insured drivers but ask an additional excess in the event of a crash while on the phone. It is a win win scenario for all and particularly for the insurance companies. The drivers get something that they might not consider as necessary until after they crash; the police can use the saved man hours to resolve other issues; and the insurance companies get free promotion, smaller payouts and safer drivers.

Yet sadly i do not think this will take place - it is an obvious choice for an economist who looks at dynamic benefits for the insurance company, but anathema to an accountant who only sees the static costs of insurance companies rise.

By Alexander Apostolides on December 13, 2009

Posting on the Blog and receiving the Posts as Email

Dear All, This is a more of a housekeeping email / post.

I would like to ask anyone who is receiving this blog by email to know that:
1) they should email me if they want to stop receiving blog updates
2) The email is in my name but as the "Economist of Cyprus" is a collaborative blog some of the postings are of other authors. Thus i would request the authors to sign their posts so interested parties can contact them directly.

To the authors:
1) If you are sending in a blog post by email it is better to remove difficult fonts. If you are using the new word 2007 then just start a blog document rather than a word document in order to ensure compatibility with internet fonts. If it is word document it is better to "cut" the document and then "paste special" in word prior to sending it. Once uploaded one can add the fonts by editing the blog post in the Dashboard.

Thanks and have a nice Sunday,

By Alexander Apostolides on December 12, 2009

Πόσα στοιχίζει ένα πτυχίο στην Κύπρο

Το ετήσιο οικονομικό κόστος των προπτυχιακών σπουδών στην Κύπρο μπορεί να φτάσει σε πολύ ψηλά επίπεδα για τους φοιτητές των ιδιωτικών πανεπιστημίων οι οποίοι δεν διαμένουν με τους γονείς τους κατά τη διάρκεια των σπουδών τους.

Όπως αναμένεται την μερίδα του λέοντος στο κόστος ζωής των φοιτητών φέρουν τα δίδακτρα (όπου καταβάλλονται) και τα έξοδα διαμονής. Τα ετήσια δίδακτρα στα ιδιωτικά πανεπιστήμια θα υπερβούν φέτος τα 8,000 Ευρώ (για πρώτο πτυχίο), ενώ τα έξοδα διαμονής κυμαίνονται σε 400-550 Ευρώ το μήνα. Το συνολικό ετήσιο κόστος ζωής εξαρτάται από τον κάθε φοιτητή και μπορεί να φτάσει τα 1,000 Ευρώ το μήνα. Κρατικές και ιδιωτικές χορηγίες/υποτροφίες μπορούν να χρυσώσουν σε κάποιο βαθμό το χάπι.

Βάσει πρόσφατης έρευνας σχεδόν δυο στους τρεις φοιτητές των κρατών μελών της Ευρωπαϊκής Ένωσης υποστηρίζουν ότι η ανώτατη εκπαίδευση πρέπει να είναι δωρεάν, ενώ οι υπόλοιποι θεωρούν ότι τα δίδακτρα σπουδών είναι αποδεκτά - δεδομένου ότι παρέχονται στους φοιτητές υποτροφίες και δάνεια. Μεγαλύτερο παράπονο όσον αφορά το κόστος τον διδάκτρων φέρονται να έχουν στην Ελλάδα, εφόσον περισσότεροι από εννέα στους δέκα Έλληνες φοιτητές - το μεγαλύτερο ποσοστό στην Ευρωπαϊκή Ένωση - πιστεύουν ότι η τριτοβάθμια εκπαίδευση πρέπει να παρέχεται δωρεάν προς όλους. Την ίδια θέση εκφράζουν και περισσότεροι από οκτώ στους Κυπρίους και τα ίδια ποσοστά παρουσιάζονται και στη Δανία, τη Φιλανδία, τη Μάλτα και την Σλοβενία. Πόσο ψηλά είναι όμως τα δίδακτρα στην Κύπρο;

Εκ πρώτης όψεως δεν είναι και τόσο απαγορευτικά, τουλάχιστον στα κρατικά ιδρύματα. Στο Πανεπιστήμιο Κύπρου τα ετήσια δίδακτρα ανέρχονται σε  3,418 Ευρώ για τους Κυπρίους προπτυχιακούς φοιτητές - τα οποία καταβάλλονται από το κράτος. Το ίδιο κόστος φέρουν και οι φοιτητές που εγγράφονται από κράτη μέλη της ΕΕ, ενώ για τους φοιτητές που προέρχονται από χώρες εκτός ΕΕ το κονδύλι διπλασιάζεται. Τα συνολικά δίδακτρα των προγραμμάτων μάστερ είναι 5,125 Ευρώ για τα προγράμματα που προσφέρονται στην ελληνική γλώσσα.

Ωστόσο το μεταπτυχιακό πρόγραμμα μάστερ στη Διοίκηση Επιχειρήσεων (MBA), το οποίο προσφέρεται στα Αγγλικά, κοστίζει ακριβώς το διπλάσιο (10,300 Ευρώ), ενώ για την απόκτηση διδακτορικού τίτλου τα δίδακτρα καθορίζονται ως εξής:  250 ΛΚ (428 Ευρώ) ανά μάθημα για την περίοδο διδασκαλίας,  500 ΛΚ (854 Ευρώ) ανά εξάμηνο για την περίοδο έρευνας, και  100  ΛΚ (171 Ευρώ) ανά εξάμηνο για την περίοδο συγγραφής της διατριβής. Στο ίδιο επίπεδο φαίνονται να κυμαίνονται και τα δίδακτρα του νεοσύστατου Τεχνολογικού Πανεπιστημίου Κύπρου (ΤΕΠΑΚ).

Αυτά όσον αφορά τα κρατικά πανεπιστήμια. Όπως αναμενόταν, στις ανώτατες εκπαιδευτικές σχολές του ιδιωτικού τομέα - και ιδιαίτερα στα τρία ιδιωτικά πανεπιστήμια

Για το Πανεπιστήμιο της Λευκωσίας τα ετήσια δίδακτρα για τα προπτυχιακά προγράμματα για το ακαδημαϊκό έτος 2009-2010 (βάσει της επίσημης ιστοσελίδας του) υπολογίζονται σε 8,400 Ευρώ για τους Κύπριους και τους πολίτες κρατών μελών της ΕΕ και 8,550 Ευρώ για τους υπόλοιπους. Όσον αφορά στα μεταπτυχιακά προγράμματα, το συνολικά δίδακτρα (για ολόκληρο το πρόγραμμα) κυμαίνονται σε 10,170-13,156 Ευρώ για τους Κυπρίους/πολίτες ΕΕ και σε 11,880-13,386 Ευρώ για τους φοιτητές από άλλες χώρες. Κάποιες επιπρόσθετες χρεώσεις υπολογίζονται από το πανεπιστήμιο σε μέχρι 226 Ευρώ για Κυπρίους/ΕΕ και σε 887 Ευρώ για τους διεθνείς φοιτητές (τα 400 από τα 887 Ευρώ αποτελούν εγγύηση η οποία επιστρέφεται κατά την ολοκλήρωση των σπουδών).

Τα ετήσια δίδακτρα για τα προπτυχιακά προγράμματα του Ευρωπαϊκού Πανεπιστημίου Κύπρου (ΕΠΚ) υπολογίζονται για φέτος σε επίσης σε 8,400 Ευρώ για Κυπρίους/ΕΕ, όπως αναφέρεται στην επίσημη του ιστοσελίδα. Σημειώνεται ότι τα δίδακτρα εξαρτώνται από το συνολικό αριθμό μαθημάτων που παίρνονται σε κάθε έτος. Για τα μεταπτυχιακά προγράμματα τα δίδακτρα ορίζονται σε 891 Ευρώ σε κάθε μάθημα και δεδομένου ότι τα μεταπτυχιακά προγράμματα περιλαμβάνουν συνήθως 10, το συνολικό κόστος μπορεί να υπολογιστεί περί των 9,000 Ευρώ. Τα ετήσια δίδακτρα για το πρόγραμμα MBA υπολογίστηκαν από το πανεπιστήμιο ως 5,490 Ευρώ και το χαμηλό του κόστος σε σχέση με τα υπόλοιπα μεταπτυχιακά προγράμματα πιθανόν να οφείλεται στο ότι περιλαμβάνει σαφώς λιγότερες διδακτικές μονάδας. Επιπρόσθετες χρεώσεις υπολογίζονται σε 130-156 Ευρώ, ενώ τα αναμενόμενα δίδακτρα, μαζί με τις επιπρόσθετες χρεώσεις για τους διεθνείς προπτυχιακούς φοιτητές, υπολογίζονται από το πανεπιστήμιο σε 9,454 Ευρώ.
Για το Πανεπιστήμιο Frederick, το τρίτο μεγαλύτερο ιδιωτικό πανεπιστήμιο της ελεύθερης Κύπρου, τα ετήσια δίδακτρα υπολογίζονται σε 8,100 Ευρώ τόσο για τους προπτυχιακούς όσο και για τους μεταπτυχιακούς φοιτητές (εφόσον βάσει της ιστοσελίδας του αντιστοιχούν και στα δύο προγράμματα ίσος αριθμός credits για κάθε ακαδημαϊκό έτος). Όσο για τα ιδιωτικά κολλέγια, βάσει της ιστοσελίδας της Ευρωπαϊκής Επιτροπής, τα δίδακτρα για τις ιδιωτικές σχολές τριτοβάθμιας εκπαίδευσης στην Κύπρο κυμαίνονται σε 2,500-6,000 Ευρώ περίπου ανά ακαδημαϊκό έτος. Δεδομένων των διδάκτρων όπως αναγράφονται στις ιστοσελίδες των ιδιωτικών πανεπιστημίων όμως, είτε τα ιδιωτικά πανεπιστήμια δεν περιλαμβάνονται σε αυτή την εκτίμηση, είτε οι πληροφορίες που αναγράφονται στην συγκεκριμένη ιστοσελίδα χρήζουν σοβαρής αναθεώρησης. Για την απόκτηση μεταπτυχιακού διπλώματος τα δίδακτρα κυμαίνονται από 8,000 έως 14,500 Ευρώ (αυτές οι εκτιμήσεις πιθανόν να αφορούν το συνολικό κόστος του προγράμματος και όχι μόνο για ένα χρόνο).

Κόστος Διαβίωσης
Το κόστος σπουδών ωστόσο περιλαμβάνει εκτός από τα δίδακτρα και το κόστος διαβίωσης. Αν και στην Κύπρο λόγω των μικρών αποστάσεων πολλοί φοιτητές διαμένουν με τους γονείς τους (ακόμα και αν το πανεπιστήμιο/κολλέγιο τους είναι σε διαφορετική πόλη) υπάρχει και το κόστος διατροφής, όπως και το κόστος εκπαιδευτικών υλικών (χώρια το «επίδομα διασκέδασης» - τα έξοδα παραστάσεως των Κυπριών φοιτητών).

Από πληροφορίες που περιέχονται στην ιστοσελίδα του Πανεπιστημίου Κύπρου, το κόστος διαβίωσης εξαρτάται από τον τρόπο ζωής και τους διαθέσιμους πόρους του κάθε φοιτητή. Ωστόσο, τα υπολογιζόμενα έξοδα διαβίωσης στη Λευκωσία για το μέσο φοιτητή υπολογίζονται μεταξύ 700 με 1000 Ευρώ μηνιαίως, συμπεριλαμβανομένων των εξόδων ενοικίου. Όσον αφορά ειδικά το ενοίκιο (που για τους φοιτητές που δεν μένουν με τους γονείς τους αποτελεί το μεγαλύτερο μέρος των εξόδων τους), κυμαίνεται από 400 μέχρι και 550 Ευρώ σε όσους δεν έχουν την τύχη να διαμένουν σε φοιτητική εστία, όπου το κόστος είναι σημαντικά μειωμένο. Ενδεικτικά και πάλι με βάση πληροφοριών από το Πανεπιστήμιο Κύπρου, το ενοίκιο για διαμέρισμα ενός υπνοδωματίου κυμαίνεται μεταξύ 400 και 500 Ευρώ το μήνα, των δύο υπνοδωματίων κυμαίνεται μεταξύ 480 και 600 Ευρώ το μήνα, ενώ το ενοίκιο για διαμέρισμα τριών υπνοδωματίων μεταξύ 600 και 770 Ευρώ το μήνα.Κατά την ιστοσελίδα του Ευρωπαϊκού Πανεπιστήμιου Κύπρου το μηνιαίο ενοίκιο σε επιπλωμένα διαμερίσματα κυμαίνεται σε 450 και 550 Ευρώ το μήνα και δεν περιλαμβάνει τους λογαριασμούς νερού, ηλεκτρισμού και τηλέφωνου. Από την ίδια πηγή πληροφοριών, φαίνεται ότι το μέσο ετήσιο κόστος για διαμονή (περιλαμβάνοντας σαφώς και αυτούς που διαμένουν σε φοιτητικές εστίες) υπολογίζεται σε 2,500-3,000 Ευρώ ανά ακαδημαϊκό έτος. Τα υπόλοιπα προσωπικά έξοδα του κάθε φοιτητή υπολογίζονται σε 2000-2500 για διατροφή και 400-500 για βιβλία και άλλο διδακτικό εξοπλισμό. Βάσει του Ευρωπαϊκού Πανεπιστημίου Κύπρου το συνολικό κόστος διαβίωσης κυμαίνεται σε 4,900-6,000 Ευρώ ανά ακαδημαϊκό έτος.Αν λάβει άρα κανείς υπόψη ότι τα ετήσια δίδακτρα (χωρίς επί πλέον χρεώσεις) στα ιδιωτικά πανεπιστήμια υπολογίζονται σε 8400 Ευρώ και το κόστος ζωής ενός φοιτητή μπορεί να φτάσει τα 6,000 (βάσει του ΕΠΚ), η ρήτρα για τους γονείς μπορεί να είναι 14,400 Ευρώ για το πρώτο έτος μόνο. Αν ληφθεί υπόψη και το υπολογιζόμενο κόστος διαβίωσης στην Λευκωσία (βάσει του Πανεπιστημίου Κύπρου), το κονδύλι τότε ανεβαίνει στα 18,000 Ευρώ, ακόμα και αν ο φοιτητής/φοιτήτρια επιστρέφει το καλοκαίρι στο πατρικό του/της. Επιπλέον έξοδα/χρεώσεις άρα μπορούν να ανεβάσουν το κόστος σε 20,000 Ευρώ! Μέρος αυτών των εξόδων μπορούν να καλύπτουν από διάφορες χορηγίες, κυρίως από το δημόσιο τομέα. Στις οικογένειες προπτυχιακών και μεταπτυχιακών Κυπρίων φοιτητών που καταβάλλουν δίδακτρα σε αναγνωρισμένα προγράμματα τριτοβάθμιας εκπαίδευσης χορηγείται κρατική επιχορήγηση ύψους 1,500 ΛΚ (2,563 Ευρώ).  Οι οικογένειες φοιτητών που δεν χρειάζεται να καταβάλλουν δίδακτρα λαμβάνουν κρατική επιχορήγηση ύψους 1,000 ΛΚ (1,709 Ευρώ).  Η επιχορήγηση προσαυξάνεται κατά 500 ΛΚ (854 Ευρώ)  εάν ο φοιτητής/σπουδαστής προέρχεται από πολύτεκνη οικογένεια.  Οι αριστούχοι φοιτητές του Πανεπιστημίου Κύπρου και άλλων σχολών τριτοβάθμιας εκπαίδευσης μπορούν, επίσης, να λάβουν σημαντική οικονομική στήριξη από το Ίδρυμα Κρατικών Υποτροφιών ή άλλους οργανισμούς.  Στην ιδιωτική τριτοβάθμια εκπαίδευση προσφέρονται υποτροφίες σε επιτόπιους αριστούχους φοιτητές που εισάγονται στα σχετικά ιδρύματα, ενώ επιχορηγήσεις καταβάλλονται από τα ιδρύματα σε φοιτητές με εξαιρετικές ακαδημαϊκές ή αθλητικές επιδόσεις κατά τη διάρκεια των σπουδών τους καθώς και σε φοιτητές που αντιμετωπίζουν σοβαρά οικονομικά προβλήματα.

By Alexander Apostolides on December 11, 2009

The economics of cutting carbon emmisions

A very good friend of mine does not believe we should cut carbon emissions. His argument is that either there is no climate change or if there is we are too late since we have ruined the world already - we just can't cut emission enough to revert the process. I disagree and have used rational (but very economic thinking) to explain why this can not be so. He does not understand me - so i thought i will but it in an economic blog and you can tell me there is a flaw in my thinking.

We can not calculate the true cost of climate change - its actual repercussion are not revealed to us in full. We do know the worst case scenario though: that within a span of some generations we will totally ruin our environment and our civilization, perhaps even destroying life. This is by far the most extreme case: in this case the cost of climate change is infinite - to quote REM "its the end of the world as we know it". Since the true cost is not revealed to us we have to assign a cost in terms of probabilities. Lets assign a probability of 0.000000000000000001% chance of this extreme scenario to take place - a pretty slim chance.

At the same time we are not sure if we can reverse climate change- maybe my friend is right: we are too late. Yet we do not know this - once again the possibility of reverting climate change is not revealed to us. Lets say that there is a 0.0001% chance of reversing climate change by reducing the emissions of the Kyoto protocols.

Yet the true cost is infinite! thus the 0.0000000001% of infinite is infinitely costly. Since the future is infinite, it is worth spending any amount of money to try and stop it, even if it even has a 0.0001% of success.

Thus the argument is clear to me: the whole point of whether or not climate change is man made and reversible is pointless right now - it will be revealed to us in the Long Run. What is more important is start cutting emissions now, irrespective of costs and of the possibility of success; the cost of not doing so is too high.

Have a nice weekend

By Alexander Apostolides on December 08, 2009

The Parking spot of the Government Spokesman

This is not an economic post but it is entertaining - i promise to write one on the economics of insurance soon to make it up to you!

I had to go to 2 government agencies yesterday - and as always the experience was gruelling enough to knock me out for the rest of the day. First up was the Cypriot archive - the only government service that counts 2 working days not counting the one you are in (i.e monday) and not counting Friday. Apparently they go to work on Friday but since that day the archives are closed for the public (lord knows what they do) then it their logic Friday does not count as a working day.

I then went to the Press Information Office (PIO). I loved the new organisation of the newspaper archive and Mr. Demetris there was very helpful. However on my way out i was dismayed to see the scene below. There was not enough space for the cars of the government spokesman, the principal of the PIO and the attorney general right outside the common government building they share. So the solution was simple make one of only two handicapped parking spaces into the parking space of the government spokesperson.

This works perfectly: the government spokesman, the principal of the PIO and the attorney general are almost equidistant to the door. The poor handicapped driver or carer could of course park on the remaining handicapped space.

What happens to the remaining space? Since the press does not have dedicated parking places in the PIO the remaining space was swamped with 2 cars and 3 bikes... the handicapped could of course park on in field, then push themselves up the hill, avoid the park cars, and then ask someone to lift them up the stairs; the ramp was closed by the cars of the press.

By The Carpenter on December 07, 2009

Numbers can lie

Smart statisticians, economists, CEOs can play with numbers to make them look good.

That is why companies play with their ROI models changing them whenever they feel they should. That is why executives spend a great deal of time choosing their words in the opening statements of the annual reports.

I got the idea for this post when I was reading InBusiness the other day and there was a section saying that the average monthly salary for men in Cyprus is €1,833 and for women about €1,580. I have always claimed that the “average” is not always the best type of measurement and in my humble opinion it is very wrong to use this for the average wage.
Let me explain myself:

In recording all wages, there are many outliers. Probably an average job in Cyprus would pay between €1100 to €2000. But there are many people who earn much more than that. Those outliers are always on the top side and not the bottom. We cannot have outliers on the bottom because according to regulations there is a minimum wage that needs to be paid. So for every person in the population the lowest wage you can find equals the minimum wage. On the other hand, there can be many outliers on the top side. There are people who earn € 5,000 a month, there are people who earn €10,000 and there are people who earn €30,000 a month. These figures unavoidably inflate the average salary giving a misrepresentation. All things considered I believe that the use of the median would probably be much more representative in cases of salaries.

Thinking about numbers, I also remembered an article I read about Lawrence Summers, ex-President of Harvard. If you ask pretty much anyone they would tell you that Mr. Summers claimed in a business lunch that “men are smarter than women”. What he actually said is that “there is greater variance in the intelligence of men than women”. Of course Mr. Summers is not stupid, he is actually very smart and he made his comment after years of research. Greater variance means that the tails of a normal curve of the IQ of men are a bit larger than the respective ones of the women. There might be more men than women who demonstrate a higher than normal IQ , but there are also more men than women who demonstrate lower than normal IQ.

By The Carpenter on December 02, 2009

Cyprus "driving"

I was reading Politis newspaper online today, when my eyes fell on this new prospective law that was discussed in the Cyprus Parliament. Two members of the Parliament proposed that we change the legal driving age in Cyprus from 18 to 17. Of course, that extra year, from 17 to 18 the acquirer of the new driving license would have to drive with an adult in the car. Their reasoning was that countries like the U.S, UK, Norway, Sweden and France have this law and they have fewer accidents per capita than Cyprus.

And here come my objections/ questions:

It is very naïve and very wrong to compare Cyprus with the U.S, the U.K, Norway and France. One cannot compare only one variable (in this case driving age) to examine the relationship with another variable (accidents per capita). There are a number of factors that play a major role in the number of accidents in a country.

Firstly, there is a major difference in terms of road infrastructure. Cyprus does not have the road infrastructure that U.S and U.K have. Thinking of accidents in Cyprus, a majority of them happen in streets that connect villages. These are usually roads without signs, and with very dangerous turns, and very narrow streets.

A second objection is the fact that the new drivers will have to drive with an adult in the car for the first year. As much as I would like to believe it, I can only see this happening for about a week if not less. Call it Cypriot attitude, call it Cypriot culture, call it whatever you want, I think that after the first week most parents would be very busy to ride in the car with their son/ daughter.

A third objection is the process of acquiring a drivers license in Cyprus. OK, the truth is that I have no proof, but I have heard of a lot of people that who have gotten their drivers license in an envelope. Why would we want to put more dangerous, inexperienced, immature drivers in the streets?

Fourth, why would we want to put more cars in the street? I can’t really project how much of a problem that would be (probably minimal) but in an already overcrowded with cars country, why do we want more people driving? The effort should be to push more people to ride the buses (that currently do not exist).

Fifth, there is another issue with the attitude towards Cyprus policing. Despite any laws and the consequences, Cypriots have a tendency to not see police as a strict regulatory body and will not care much of breaking any laws (e.g 17 year olds driving on their own).

Last but not least, 40% of the accidents happen in the age 15-24. If we pass this law are we really ready to put in practice what we say? Do we have the regulations, can the parents adopt their responsibilities, can the police control the 17 year olds? Will that extra year give them the required experience to decrease the number of accidents? Or will the extra year increase the number of accidents?

You can’t really build a beautiful house by start painting it first. You have to put the bricks and the cement, and the roof and then maybe you should start thinking of the color.

Well done on Malta wining the race for a European Immigration asylumn centre

Well done Malta! I have mentioned before that Malta is much more competent in the cloak and dagger policies of the European Union. Despite previous dreadful incidents relating Malta and immigrants from Africa, Malta has won the unofficial race to host the new European asylum office. The office will be placed in a pretty derelict area of the Grand harbour, which lost part of its purpose with the replacement of the port with a Freeport in Marsaxlokk.

Do not be fooled - this took some hard lobbying, and i am guessing that it helped when the decision was made to place it to a new member state since immigration is an issue of Cyprus a Malta - with the other "new" states being emigrate countries. Cyprus was not consistent enough to win it and we were focused on the December deadline for the Turkish entry...

P.s.1 I have just been informed that the centre was a suggestion of the Cypriot government to the the European Union - if that is the case then loosing means we did something very very wrong.

By Alexander Apostolides on December 01, 2009

Why i think the new "Eleutheria" square will be a dissaster

I was in the library of the university of Cyprus when by chance i saw a very glossy book on Zaha Hadid. It was 50 pages of fawning praise on her work the "Car Park and Terminus Hoenheim North". It won quite a prestigious award.

There is no doubt that the terminal is pretty in a hard, concrete, kind of way. In the green expanse in the Hoenheim suburbs, this brings a Teutonic beauty. (OK you guessed it i do not really like it!).
What scares me is that Ms. Hadid's work is all like this - impersonal and concrete. In a city choked full of concrete and in dire need of greenery, baked silly during the summer months by the sun, the last thing we need is more granite, concrete and steel. I worry that we will miss the old "Elutheria square", with its tall trees on the side and the petty vendors in the middle.

By strovoliotis on November 27, 2009

Με τον Ορφανίδη να σπάσουμε τα κατεστημένα;

Θεωρώ τον Διοικητή της Κεντρικής Τράπεζας ως ένα αξιόπιστο και ικανό τεχνοκράτη. Ένα άνθρωπο απαλλαγμένο από πολιτικό κόστος, η γνώμη του οποίου έχει σημαντικό βάρος. Και στην Κύπρο, αλλά και εκτός αυτής.

Όταν λοιπόν δηλώνει τα πιο κάτω, δεν πρέπει κανείς να τα αγνοήσει. Η Κυπριακή οικονομία ΔΕΝ πάει καλά.

Παγιδευμένη σε μια κρίση όπως όλοι, θα μπορούσε να ευχηθεί κάποιος πως όταν περάσει το κακό θα γίνουν όλα καλά.

Δεν είναι έτσι όμως. Όπως επισημαίνει και ο κ. Ορφανίδης τα προβλήματα μας είναι δομικά. Τι σημαίνει αυτό; Σημαίνει πως τα θεμέλια μας, τα υλικά από τα οποία είναι φτιαγμένο το σύστημα μας είναι κακής ποιότητας. Αποτελούν κληρονομιά των τελευταίων πολλών δεκαετιών που παίζαμε μόνοι μας, που είχαμε άλλες προτεραιότητες, που είχαμε το «μεγάλο άλλοθι» του Κυπριακού να δημιουργεί και να συντηρεί προβλήματα, κατεστημένα, κεκτημένα και ένα σωρό στρεβλώσεις. Στρεβλώσεις που έχουν οδηγήσει την Κυπριακή οικονομία σε ένα αξιοθρήνητο επίπεδο όσον αφορά την ανταγωνιστικότητα, μια σημαντική παράμετρο η οποία επηρεάζει όλο το σύστημα.

Δεν αμφιβάλλω πως τα χειρότερα έπονται. Η έλλειψη ανταγωνιστικότητας θα οδηγήσει όλο και περισσότερες Κυπριακές επιχειρήσεις παραγωγής στη συρρίκνωση λόγω αυξημένου κόστους, ενώ την ίδια τύχη θα έχει και ο κλάδος των υπηρεσιών. Η αύξηση του ελλείμματος σημαίνει πως ο κάθε ένας από εμάς θα χρωστά πολύ περισσότερα λεφτά από όσα χρωστά τώρα, ενώ το κυριότερο είναι πως η αύξηση του ελλείμματος θα οδηγήσει μοιραία και στην μείωση των διαθέσιμων πόρων για ανάπτυξη με περαιτέρω αρνητικές επιπτώσεις.

Οι λύσεις δεν είναι εύκολες, και χρειάζονται τόλμη και αποφασιστικότητα. Τα κεκτημένα παύουν να είναι κεκτημένα όταν η χώρα αντιμετωπίζει σοβαρό πρόβλημα.

Κανονικά το παράδειγμα της Ιρλανδίας θα έπρεπε να κάνει τον κ. Χατζηπέτρου και την ΠΑΣΥΔΥ να προσφερθούν οι ίδιοι να περικόψουν τους μισθούς τους κατά 5 ή 10%. Ναι, θα μειωθεί ίσως η κατανάλωση, αλλά η μείωση του ελλείμματος που θα προκύψει από μια τέτοια κίνηση θα έχει ευεργετικά αποτελέσματα για όλη την οικονομία. Το κρατικό μισθολόγιο είναι το μεγαλύτερο κομμάτι του προϋπολογισμού, και αποτελεί την πλέον ανελαστική και μάλιστα με αυξητικές προδιαγραφές παράμετρο.

Και δεν είναι μόνο το οικονομικό επιχείρημα: η ΠΑΣΥΔΥ ως συνδικαλιστική οργάνωση έχει την αλληλεγγύη ως βασική της αρχή. Τώρα είναι η ώρα να την δείξει και στην πράξη: σε μια συγκυρία που όλοι οι άλλοι παίκτες της οικονομίας αντιμετωπίζουν ντε φάκτο μειώσεις στα εισοδήματα τους, δεν νοείται εκείνοι να διατηρούν το ίδιο εισόδημα, το οποίο για να πάρουν σημαίνει πως κάποιοι άλλοι δουλεύουν περισσότερο!

Το πρόβλημα όμως δεν είναι μόνο η ΠΑΣΥΔΥ και οι δημόσιοι υπάλληλοι.

Η κρατική μηχανή χρειάζεται αναδιάρθρωση, χρειάζεται μελέτη των παραγωγικών δραστηριοτήτων, και αλλαγές όπου κρίνεται πως μια υπηρεσία δεν κάνει σωστά και ανταγωνιστικά τη δουλειά της. Αν πρέπει να τρυπήσουμε τους δρόμους και για να το κάνουμε αυτό επιλέγουμε είτε τα Δημόσια Έργα είτε τον Μιλτιάδη Νεοφύτου, τότε γιατί να μην δούμε όλες τις υπηρεσίες που προσφέρονται από το κράτος με αυτό τον φακό; Αν κάποια υπηρεσία μπορεί να προσφερθεί σε ποιότητα μετρημένη με αυστηρά κριτήρια από τον ιδιωτικό τομέα, γιατί να βασανίζεται μέσα στην κρατική γραφειοκρατία;

Ακόμα, τα κρατικά σχεδόν μονοπώλια της ΑΗΚ ΑΤΗΚ κλπ, ανοίγονται σιγά σιγά στον ανταγωνισμό. Μα, οι οργανισμοί αυτοι ανήκουν τελικά στους φορολογούμενους, και ως μέτοχος τους απαιτώ από τον διαχειριστή της περιουσίας μου αυτής να προβληματιστεί για το μέλλον της. Γιατί αν το μέλλον των οργανισμών αυτών εν όψει ανταγωνισμού είναι η μείωση μεριδίου και η συρρίκνωση, τότε εγώ θα επιθυμούσα την άμεση τους πώληση σε ιδιώτες επενδυτές τώρα που έχουν ακόμα σημαντική αξία (αν έχουν). Διαφορετικά σε λίγα χρόνια θα θέλουμε πόρους απλώς για να συντηρήσουμε τους οργανισμούς, όχι τις υπηρεσίες οι οποίες θα προσφέρονται έτσι ή αλλιώς από τον ιδιωτικό τομέα.

Η Κύπρος χρειάζεται επανεφεύρεση ως τουριστικός προορισμός με έμφαση στην ποιότητα και τον τοπικό χαρακτήρα (λέμε τώρα), και την ίδια στιγμή καινούργιο προφίλ ως προορισμός για το διεθνές εμπόριο και τις υπηρεσίες. Αυτό χρειάζεται όμως και επενδύσεις, και – πάλι – αναδιάρθρωση υπηρεσιών, αλλά και στόχευση να είμαστε πάντα στην αιχμή της τεχνολογίας.

Όλα τα πιο πάνω, σημαίνουν ένα πράγμα: σύγκρουση με τα κατεστημένα.

Ποίος μπορεί;

Ποιος τολμά;

Τέλος: πρέπει να λύσουμε το Κυπριακό. Η μη λύση στοιχίζει σε στοχευμένα και μη επιδόματα και παροχές, σε αδικοχαμένα λεφτά για μια άμυνα που αξίζει όσο ο προϋπολογισμός της. Μια λύση θα δημιουργήσει μομέντουμ, τόσο εντός της ιδίας της Κύπρου, αλλά και για την Κύπρο από τρίτους. Η σχέση που θα έχει η Κύπρος στην μετά τη λύση εποχή με την Τουρκία δεν θα μπορεί να περάσει απαρατήρητη.

Πιο κάτω τα βασικά σημεία της ομιλίας Ορφανίδη στη Βουλή:

Ορφανίδης: Τα χειρότερα έπονται…

Τα χειρότερα έπονται για την κυπριακή οικονομία τόνισε ο διοικητής της Κεντρικής Τράπεζας, Αθανάσιος Ορφανίδης, υπογραμμίζοντας ότι τα επόμενα χρόνια η κυπριακή οικονομία θα βρίσκεται υπό την επιτήρηση της Ευρωπαϊκής Επιτροπής με διαχρονικά ελλείμματα και αυξανόμενα χρέη. Μιλώντας ενώπιον της Κοινοβουλευτικής Επιτροπής Οικονομικών για το κρατικό προϋπολογισμό του 2010, ο κ. Ορφανίδης υποστήριξε ότι έχουν επιβεβαιωθεί οι χειρότερες προβλέψεις τους και ότι σύμφωνα με τα νέα στοιχεία της ΚΤ, τα οποία θα δοθούν στη δημοσιότητα τις επόμενες ημέρες, το έλλειμμα για το 2009 θα ξεπεράσει σημαντικά το όριο του 3%, ενώ το 2010 θα ξεπεράσει το 5,75% και το 6% το 2011. Ο ρυθμός ανάπτυξης εκτιμάται από την ΚΤ ότι θα μειωθεί πέραν του 1% το 2009 ενώ το 2010 θα υπάρχει οριακή μόνο αύξηση.

Συνεχίζοντας, υπέδειξε ότι το συμπέρασμα που προκύπτει είναι ότι η επιδείνωση αυτή είναι δομικής φύσης και αναπόφευκτα θα οδηγήσει τη χώρα μας σε διαχρονικά ψηλά ελλείμματα, αλλά και υπό την επιτήρηση της Ευρωπαϊκής Επιτροπής.

Παράλληλα, επεσήμανε ότι η ανεργία θα εξακολουθήσει να αυξάνεται σημαντικά και τον επόμενο χρόνο.

Πρόσθεσε ακόμη ότι η επιδείνωση της οικονομικής κατάστασης στην Κύπρο, ιδιαίτερα κατά το τρίτο τρίμηνο του έτους, καταγράφεται τη στιγμή που στη ζώνη του ευρώ παρατηρείται βελτίωση του οικονομικού κλίματος.

Ο κεντρικός τραπεζίτης υπογράμμισε ότι αυτό που θα πρέπει να ανησυχεί περισσότερο είναι η σημαντική επιδείνωση του δημοσιονομικού ελλείμματος, ιδιαίτερα από το 2010 και μετά.

Ειδικότερα όσον αφορά τον κρατικό προϋπολογισμό, είπε ότι θα πρέπει να βασίζεται σε δύο βασικές αρχές, τη δημοσιονομική πειθαρχία και τη δημοσιονομική ευελιξία. Η δημοσιονομική πειθαρχεία, εξήγησε, είναι σημαντική για την αξιοπιστία και την ικανότητα χάραξης μακροοικονομικής πολιτικής και η οποία συμβάλλει στον περιορισμό του μακροπρόθεσμου κόστους χρηματοδότησης και της αύξησης της παραγωγικότητας. Από την άλλη, σημείωσε ότι η δημοσιονομική ευελιξία είναι απαραίτητη για τη διαχείριση του μακροπρόθεσμου δανεισμού στο οικονομικό περιβάλλον, όπως ακριβώς η σημερινή ύφεση.

Ο διοικητής ήταν όμως ξεκάθαρος και για τον αργό ρυθμό μείωσης των επιτοκίων, επιρρίπτοντας την ευθύνη στην κυβέρνηση.

«Δυστυχώς οι βραχυπρόθεσμες κινήσεις της κυβέρνησης για άντληση ρευστότητας από την ΕΚΤ είχαν ως αποτέλεσμα να δυσκολευτούν οι τράπεζες οι οποίες δεν μπορούσαν μέσα στο αβέβαιο κλίμα που επικρατούσε να αυξήσουν το δανεισμό και να μειώσουν τα επιτόκια».

Ταυτόχρονα, επανέλαβε με σαφήνεια ότι οι τράπεζες δεν αντιμετωπίζουν πρόβλημα ρευστότητας, αλλά πρόβλημα με την πλεονάζουσα ρευστότητα τους λόγω της πτώσης του ρυθμού αύξησης των δανείων.

«Εάν το υπουργείο Οικονομικών προέβαινε σε έγκαιρους σχεδιασμούς τα επιτόκια θα ήταν κατά μια ποσοστιαία μονάδα από το καλοκαίρι πιο χαμηλά», επεσήμανε.

Εξέφρασε ωστόσο την εκτίμηση ότι μετά την εισροή από τον επόμενο μήνα στην αγορά της ρευστότητας από την έκδοση των ειδικών τριετών κυβερνητικών χρεογράφων ύψους €3 δισ., θα μειωθούν περαιτέρω τα επιτόκια.

Ο κεντρικός τραπεζίτης απαντώντας σε σχετική ερώτηση των βουλευτών εξέφρασε τη διαφωνία του με την απόφαση του υπουργείου Οικονομικών για σμίκρυνση του χρόνου είσπραξης του ΦΠΑ, εκτιμώντας ότι η κίνηση αυτή ενώ θα βοηθήσει προς τη κατεύθυνση της εξυγίανσης των δημόσιων οικονομικών, εντούτοις θα δυσκολέψει τον ιδιωτικό τομέα ο οποίος θα αναγκαστεί να προβεί σε επιπλέον δανεισμό για να αντεπεξέλθει, ενώ θα έχει και αντίκτυπο στην ανεργία.

Το μόνο θετικό για την κυβέρνηση, είπε, είναι ότι θα μειώσει για ένα χρόνο το δανεισμό της.

Στο σημείο αυτό, ο κ. Ορφανίδης τάχθηκε κατά των περικοπών των αναπτυξιακών έργων, τονίζοντας ότι η ευελιξία της κυβέρνησης θα έπρεπε να επικεντρωνόταν σε αναπτυξιακά έργα.

«Η προώθηση του αναπτυξιακού προϋπολογισμού προσφέρει μακροπρόθεσμα οφέλη ενώ συγκρατεί και την ανεργία», είπε.

Τάχθηκε όμως υπέρ της μείωσης των δημόσιων δαπανών φέρνοντας ως παράδειγμα την Ιρλανδία η οποία μείωσε κατά 10% τους μισθούς και τις συντάξεις των δημοσίων υπαλλήλων της ώσπου να βρουν τα πόδια τους, είπε χαρακτηριστικά.

Αντίθετα από τις άλλες χώρες, τόνισε ότι στην Κύπρο το κρατικό μισθολόγιο αυξήθηκε 4,5%.

Όσον αφορά τις κινήσεις που έχει κάνει η κυβέρνηση για τη βιωσιμότητα του

ΤΚΑ, σημείωσε ότι εκτιμά την προσπάθεια για βελτίωση που έχει γίνει για τη βιωσιμότητα δεν είναι όμως αρκετό, ούτε κοντά στο αρκετό, είπε χαρακτηριστικά.

Λέγοντας αυτά, έριξε τη μπάλα στους βουλευτές καλώντας τους να ξεκινήσουν διάλογο για τη διάσωση του ΤΚΑ.

Δεν παρέλειψε ακόμη να κάνει αναφορά στο ισχυρό εποπτικό πλαίσιο της Κύπρου, διευκρινίζοντας ότι δεν είναι όλα μαύρα, αλλά αυτό που ανησυχεί την ΚΤ δεν είναι η κατάσταση της οικονομία σήμερα αλλά η πορεία της.

Της Ηρώς Ευθυμίου

Πηγή: Stockwatch.


Three to four years ago I was having a conversation with a bunch of business analysts and financial investors. They were raving about Dubai and the money attached to it, and how happy they were that Marfin did a double take on Laiki using Dubai funds. I tried to point out to them that if one correlated the price of oil with GDP of Dubai (with a lag of one or two years), the correlation is very high - a first indication that Dubai's rise was all about oil. My father pointed the same in his newspaper articles in the Weekly but to no avail. You could see that Dubai was a huge bubble waiting to burst: at one point a quarter of all cranes were in Dubai, with one outladish project chasing another.

Now Dubai is not going to go away - a significant part of its growth was in construction which created capital (even if it devalued) and some of the assets bought across the globe are worthwhile. But people who invested in it will lose a substantial amount of money, and that is what my business analysts and financial investors worry most about.

Another friend of mine who is an investment analyst agreed with me about the bubble in Dubai. After all i was not the only one who saw the bubble coming and its link to the high price of oil. That friend is now in charge of a significant investment fund; his employers could not have picked a better man through these turbulent times.

By strovoliotis on November 17, 2009

Τα ριάλια της λύσης.

Τον τελευταίο καιρό όποτε ανοίξω συζήτηση για το αγαπημένο μας πρόβλημα, κάποιος μου υπενθυμίζει ότι μεταξύ άλλων κακών, η λύση θα μας παττίσει, και καλό είναι να διαβάσω τις απόψεις του τέως Διοικητή της Κεντρικής Τράπεζας, (και πολλών άλλων) Χριστόδουλου Χριστοδούλου.

Το γεγονός είναι πως στη μετά τη λύση εποχή το βόρειο μέρος του νησιού θα χρειαστεί ούτως ή άλλως περισσότερες επενδύσεις, είτε διοικείται από τον Μεχμέτ Αλί Ταλάτ, είτε από τον Νικόλα Παπαδόπουλο. Άρα δεν αντιλαμβάνομαι γιατί να υπάρχει αντίρρηση στην μεταφορά πόρων σε εκείνο το μέρος, το οποίο κατά τεκμήριο είναι το πιο φτωχό μέρος της χώρας μας.

Ίσως αυτό που ξεχνούν κάποιοι είναι πως στη μετά τη λύση εποχή η Κύπρος θα ξαναγίνει ΜΙΑ χώρα. Και όπως όλες οι χώρες, σχεδιάζουν και φροντίζουν για μια συνολική ανάπτυξη.

Πέραν από τια απόψεις του κ. Χριστοδούλου, οι οποίες φαίνεται διαδίδονται στην Κυπριακή κοινωνία με πάρα πολλή μεθοδικότητα, ευτυχώς ακούμε και κάποιες πιο νούσιμες δηλώσεις.

Ο Αθανάσιος Ορφανίδης είναι ο τωρινός διοικητής της Κεντρικής Τράπεζας, και έχει αντικειμενικά πολύ μεγαλύτερη αποδοχή και εκτίμηση από τον προκάτοχό του.

Στην πιο κάτω συνέντευξη στο Reuters μιλά για πρώτη ίσως φορά για την οικονομία και την πολιτική.

Τώρα έχετε επιλογή: Ορφανίδης ή Χριστοδούλου;

INTERVIEW-Cyprus deal must safeguard united economy-CBank

Monday November 16, 2009 06:47:15 AM GMT


* Cyprus unification can give economy boost-

* Economic convergence could be "swift"

By Sakari Suoninen and Michele Kambas

NICOSIA, Nov 16 (Reuters) - The reunification of Cyprus could be a tremendous boon to the island's economy but any peace deal between now estranged Greek and Turkish Cypriots must avoid barriers, ECB Governing Council member Athanasios Orphanides said in an interview.
Cyprus, divided in a Turkish invasion after a brief Greek inspired coup in 1974, has been a member of the euro zone since 2008. Effective participation in the single currency area is confined to its south, run by Cyprus's internationally recognised government.
"I strongly believe that a unified economy gives tremendous growth potential for the island," Orphanides, governor of the Central Bank of Cyprus, told Reuters in an interview.
"It would greatly facilitate both the economic convergence that we could have -- I believe fairly rapidly -- after successful reunification. It would also create wealth that could be sorely needed in order to finance some of the aspects of reunification that we may face ahead."
They were the first public comments Orphanides has made on a slow-moving reunification process which started between Cyprus's Greek and Turkish Cypriot sides in September 2008.
Economic concerns were a crucial factor in the undoing of past Cyprus peace bids, though Cyprus's admission into the euro zone erases many of the problems, Orphanides said.
"Being in the European Union and even more so in the euro area eliminates many of these problems and areas of potential disagreement because we need to abide by the rules governing the single economy in which we now operate," he said.
A Greek Cypriot, Orphanides’s office is just kilometres away from a ceasefire line in the capital Nicosia patrolled by United Nations peacekeepers.
A large Turkish-Cypriot flag painted on a mountainside, visible from his office window, is a reminder of a conflict which is a source of tension between NATO allies Greece and Turkey and holding up Turkey's bid to join the European Union.
The government-controlled parts of Cyprus have seen buoyant growth in recent years, while northern Cyprus, an unrecognised breakaway state, has expanded much slower.
The south had gross domestic product of 17.3 billion Euros last year, while the northern economy is largely reliant on handouts from Ankara and had output of an estimated 2.5 billion Euros in 2008.
The north uses the new Turkish lira as its official currency, but the euro and pound sterling are also widely used.
"I believe we can achieve fairly rapid economic convergence, if in the context of reunification we avoid the trap of creating barriers that would unify the economy effectively.
"The fewer barriers we have in the context of a unified economy, the easier it will be to achieve a rapid convergence process and generate wealth for all citizens of the island," Orphanides said.
The last bid to unite Cyprus failed in 2004, when Greek Cypriots rejected a United Nations reunification blueprint accepted by the Turkish Cypriots.
Greek Cypriot concern at U.N. proposals of merging two disparate economies were high on their list of misgivings. Orphanides’s predecessor was a fierce critic of the U.N. blueprint.

(Editing by Patrick Graham

By Alexander Apostolides on October 24, 2009

How to filter news stories in a Recession

AS some may know my thesis is effectively on the short term and long term effects of the great depression that occurred in the 1930s. This gives me a very nice “BS filter” to filter all the economic about the global resession. For example the British economy continuing recession is the biggest non-news story. I thought I would share it with you why that is:
1) Recessions are non linear- i.e. there is no decline of output then rise of output, then out of the recession. There are some signs of recovery that might be unsustainable, there might be decisions or bank closures that through the economy in new lows. This is because the recession does not affect all the economic sectors in the same way or at the same time casing different lags in the economic system.
2) When we are talking about recessions the quarterly GDP figures are next to useless. Firstly the margin of error for quarterly accounts is more than +/- 2%, meaning that it could well fool you into thinking the recession is over. This is due to the fact that you do not count everything in a quarterly GDP – you count some things and then assume the rest is equal. However in a recession most things can change – relative prices, inventories and even intermediate consumption (i.e. production methods and their cost) are altered as people take account of the changed economic circumstances.
3) A recession is not just an decrease in total output of the economy – it is also a state of mind. Malta did not experience a recession during the period of the great depression. The effect of the depression in the whole of Europe, including Malta was the alteration of spending habits towards savings and away from consumption, condemning Malta to slower GDP growth rates for the rest of the 1930s. Likewise the economy can fell like it is a recession long after its GDP has stopped falling. In the words of a T/C economist “The recession has not affected how people live here because we have been in a permanent state of recession for the past 10 years” i.e. people feeling insecure about their future and reluctant to spend or invest.
4) Projects such as the car scrappage scheme that is in place in Greece and Germany are a wonderful way to boost output in the short term. If car sales are 10% of the economy and the scheme allows it a recovery of 5%, then the GDP output will increase by-0.5%, enough to turn the recession of the UK into a “recovery”. The project is a good idea since it understands that the recession affects consumers unequally: those who losses their jobs and bonuses might be worse off, but those on fixed salaries and safe jobs are actually better off, and they need to get over their fear and start spending.
Hope you have a nice weekend,

By Alexander Apostolides on October 12, 2009

Why Greece is so distrusted right now - Thank Mr. Christos Votsis for briing this to my attension.

A quick pull of news relating to Greece public debt from Reuters. The central banker lives in two parallel universes, he says optimistic things on Tursday from Friday.

13:32 08Oct09 -Greek deficit not seen over 10pct of GDP- cenbanker
ATHENS, Oct 8 (Reuters) - Greece's central banker said on Thursday he does not see the country's budget deficit topping 10 percent of gross domestic product (GDP) this year.
"I am optimistic that it (2009 budget deficit) will not exceed 10 percent," Bank of Greece Governor George Provopoulos told reporters after meeting with new Prime Minister George Papandreou.

Thursday, 08 October 2009 13:27:25RTRS [nATH004752] {C}E
16:38 09Oct09 -Greek 2009 deficit may reach 12 pct of GDP- cenbanker
ATHENS, Oct 9 (Reuters) - Greece's central banker said on Friday that Greece's budget deficit may reach 12 percent of gross domestic product (GDP) this year.
"Based on data we have for the first nine months, the budget deficit reached 10 percent and with the prevailing dynamics it will reach if not exceed 12 percent," Bank of Greece Governor George Provopoulos told reporters after meeting with new Finance Minister George Papaconstantinou.

By Michalis Zaouras on October 09, 2009

Obama wins Nobel Prize, what’s next Charilaos Stavrakis for the economics?

Nobel prizes are thought to be prestigious and given to people that have really made an impact either in an area of their studies or for the well being of humanity. But I was a bit of a shocked when I read today that President Obama has won the peace Nobel Prize, because as far as I know, and I do admit that I am not an expert on politics, he hasn’t contributed anything substantial. He has though made a lot of promises and he is really trying into realize them, but is that enough for a Nobel Prize. Not to forget that he has won the peace Nobel Prize and his country is still in war with Iraq and Afganistan. I would like to note that there is a debate going on other webpages about that decision and I have found that a lot of people are expressing the same opinion.

Based on the above and the logic that the Nobel committee have used to come to their decision we should not be surprised if Charilaos Stavrakis wins the Nobel for economics. Why not he has also promised a lot of things, an utopia since most of the times have nothing to do with economic intuition, but hasn’t delivered much. An example would be the disagreement with the Central Bank of Cyprus on April about measures against the economic depression and the revision of his policies some months later.

Obviously the above reasoning for the next economics Nobel winner is an exaggeration and I didn’t meant to insult to anyone, but my purpose was to inform and make us think of some matters that going on the international agenda. Because it is in my opinion that something else must be there that I am missing, speaking about the winners of the Nobel prizes.

By Alexander Apostolides on October 07, 2009

Two issues of concern: Cypriot unemployment and the new greek government

Just a quick note for topics of discussion today:
1) Cypriot unemployment is slowly creeping up to the European norm. Although the level of unemployment is still lower than the advanced countries of Europe. However the rate of growth of unemployment in alarmingly fast, even faster than most European countries that we would like to emulate. What concerns me is that the government is thinking of measures of how to stop it growing (which it can do very little about), but is not focusing in preventing this unemployment becoming structural and long terms (which it can do a lot to prevent. Any ideas / suggestions of what the plan should be?
2) I was surprised and disappointed at the choices of Mr. Papandreou, whose victory pleased me. Ignoring the usual rubbish about "αρώμα γυναίκας" (why not aftershave of men?) it is very worrying that Premier Papandreou chose the foreign ministry for himself. This is a brief that is very taxing on time - there are more meeting for foreign ministers in Brussels than there are for premiers - is he supposed to drop the day to day running of the country to represent Greece in a harmonisation negation on the size of the future European foreign mission?
Even more worrying for the negotiations of Cyprus - such an exhausting process needs people to be working on just that issue when the final phase arrives. We all remember that during the second Clerides administration, Mr. Clerides, as well as Mr. Papandreou as foreign minister, surrendered all other briefs to other people to concentrate on the negotiations. Yet as Premier of Greece, such a policy will be impossible. what are you thoughts on this issue?

By Michalis Zaouras on September 30, 2009

Difficult times need risky people, or is it the other way around?

One year ago, if I remember well, Bank of Cyprus acquired a Russian bank pledging most of its assets. Other examples would be Bank of America acquiring Merrill Lynch, JP Morgan Chase acquiring Bear Sterns and Washington Mutual and Lloyds TSB acquiring HBOS. While the last of these cases needed government intervention to survive the turmoil. In all cases huge amounts of money have been used, in a time that money liquidity is the most important for a business to survive.

So why would anyone risk the sovereignty of its organization by taking aggressive decisions in a risky and highly volatile environment. A short answer would be that the government has guaranteed, as in the case of Lloyds TSB, the bad debts inherited by the acquisition. The problem, even if you have been given some guarantees, is that if you are not solid enough to overcome a negative shock then you shouldn’t have taken the risk from the first place. At the end of the day, Lloyds TSB needed bail out from government, resulting in deterioration both of managers’ prestige and company’s competitiveness.

Another explanation would be that managers are not maximizing profits but maximize personal interest, for example they might care more for prestige and fame. This could also be a result of the no alignment of stockholders interest with managers, a well known problem called moral hazard. So the manager might choose to acquire another firm because the biggest the company you manage the more prestigious for the manager. But this leads to a new question, since government officials know about the problem of motives alignment then why offering the guarantees in the first place?

Concluding, giving away money and promises would not solve the problem. When we set a policy we, the economists, should also take in consideration alignment of interests, as well as the efficiency. Difficult times need not risky people and hasty decisions, need well constructed programs and efficient allocation of resources. The structure of decision making and firms’ competition philosophy should also be reexamined because what we have learned from the crises is that risky people will create difficult times.

By Alexander Apostolides on September 22, 2009

The economic aspects of a solution in Cyprus

Yesterday i attended a series of talks on the economic aspects of the Cyprus problem. The speakers were Mr. Basilliou, the chief G/C negotiator on European maters, Mr. Sarris, the chief G/C negotiator on Economic maters and A person form the European Commission (finance section) whom i unfortunately do not remember his name.
I left highly troubled due to three things – i do stress that below are my own conclusions of the speeches, and not the positions of the speakers themselves.
1) The EU has a Schizophrenic approach to the solution. One the one hand it does not want to get involved at all, despite the fact that a solution needs to fit (or even alter) the laws and regulations of the European Union. So it is left on the G/C side to argue that there can not be an prevention of people and capital crossing the borders of the constituent republics of a future federal Cyprus, despite the fact it is actually the EU than demands such a rule. Most worrying is the fact that the EU is thinking that Cyprus could finance rebuilding and a solution by just breaking the growth and stability pact for a maximum of 4 years. That is sheer lunacy – the construction of roads and a common electricity network, let alone making Famagusta fit for human habitation, will lead to prolonged and sustained budget deficits that could not and should not be restricted.
2) The Turkish Cypriot negotiation seems to suffer from the fact that the T/C have only the faintest idea on how the EU works. The lack of entry negotiations by the T/C mean that some demands are quite simply not realistic within an EU framework. Thus it is a fact that the EU will not accept constituent states to make any representation directly to the EU – it opens up an very ugly precedent. Thus the federal state needs to work correctly as the EU will only interloculate with federal instruments. Like wise arguing for two financial regulatory authorities, or for separate rules for Turkish institutions, goes contrary to the basic tenants of the EU and it is futile and destructive to argue for them since they will not be accepted by the EU.
3) In game theory terms, the negotiations are difficult because the actors have completely different aims: The EU, Turkey and G/C + T/C find it difficult to find common ground since their aims are parallel to each other – they simply do not connect.
I expect a long and frustrating negotiation process, that can only be aided with the EU actually becoming an actor and explaining to all what can and cannot be accepted.

By Alexander Apostolides on September 07, 2009

Bad news, but better than what we where expecting

The statistical office of Cyprus has just released the 2nd quarter GDP estimate for 2009. The results are better than the flash (i.e. incomplete) estimate, with the fall in constant terms being less than expected at -0.7%. The positive news is that the "new powerhouse industries" of international finance and services sector is still growing, albeit at a slower rate.

Although the results could be worse they are still bad:
1) Q3 is traditionally the strongest in terms of output growth containing the majority of the summer tourist season - indication show that it will be much worse than q2.
2) this is estimates in constant price terms - yet prices fell by -1.1%. Thus in constant prices (i.e. in the way it affects people's lives) the drop is much more significant.
3) It is clear that the sector hit (Tourism, Construction, Transport, restaurants) have a much higher share of total employment that the sectors that are still growing - thus further lay-offs will be expected.

By Alexander Apostolides on September 06, 2009

New paper just out: Economic history of Cyprus 1921-1938

Just thought you might be interested in a paper i presented in the Central Bank of Cyprus. It focuses on some of the key findings of my research.
My research is on the Economic history of Cyprus.Here i estimated income of Cyprus for the period 1921-1938.
The main focal points are:
1) The Great Depression was a catastrophe for Cyprus - the lack of protective tariff barriers and the incidence of serious drought meant that the Depression wiped out 10 years of growth. The recovery was also slow and only possible due to the emergence of the mining sector
2) The depression hurt the farmers particularly hard, causing a credit crunch, breaking the traditional source of credit to the farmer: this was not restored until the re-establishment of the co-op sector on a correct basis.
3) The Great depression was the greatest catalyst for the breakdown of communication between the British colonialists and the Greek-Cypriots. They were political tensions before, but they were brought to the head by the government's inability to alleviate the effect of the depression.

By Alexander Apostolides on August 26, 2009

The need for a tourism consumer price index?

I was reading the Independent today when i was struck with the recommended prices for the newspaper outside the UK.
Cyprus 4.20 Euro
Greece 3.5 Euro
Austria 3 Euro
Germany 3 Euro
Italy 3 Euro
Luxembourg 3 Euro
Spain 3 Euro
Malta 2.95 Euro

Now if one ranks these countries in terms of how rich is the average citizen (i.e. per capita GNP in purchasing power parity terms) the ranking is vastly different. With the EU-27 as 100 the richest per capita countries are:

Luxembourg 252.8
Austria 123
Germany 116
Spain 103.9
Italy 100.5
Greece 95.3
Cyprus 94.6
Malta 76.4

I think this shows that the implicit feeling in Cyprus is a very expensive tourist destination can be seen by such articles such as a foreign newspaper. Many tourist oriented products that are not included in the basket of products that is used to estimate the consumer price index. Yet prices of tourist friendly products in Cyprus are prices in complete disregard of income or transport costs. And once again this implicitly shows that Malta is doing something right when it comes to tourism - cost does not come up as worry nearly as much in tourist surveys as it does in the case of Cyprus.

By Alexander Apostolides on August 19, 2009

Another poor but nessesary descision?

Another bad decision by the government in terms of economics. Phileleitheros reports today that the government is suspending all major investment works until after the crisis. This is undoubtedly due to the fact that the projection for GDP this year will be negative.

The problem is that at a time that the revenues from tax are shrinking and the expenditure on unemployment benefits is rising, the government deficit needs to remain within 3% of GDP. Thus when GDP is shrinking the government is in trouble even if it does not increase expenditure in the economy. This will put into trouble with the European central bank, with the possibility of a huge fine.

However the problem is that recessions are exactly the time when large infrastructure project should take place. The construction industry is alleviated from its crisis by government funding, while the government can get a good price because of the distress of the building companies.
Large investment projects also help the country move out of recession since investment is the basis of continued economic growth. It is true that Cyprus has investment bottlenecks that can only be solved by the government: the harbour is in a dreadful condition with outdated technology, and the ICT depth of the government bureaucracy is woeful. Stopping such projects in order to stay within the Maastrict limits not only prevent a faster recovery but also compromises economic growth in the future.

By Alexander Apostolides on August 13, 2009

Phileleutheros Today

Phileleutheros has a article to today "Ανάπτυξη με ρυθμούς του... 1970" arguing that the GDP might well be negative. The funny thing that the average annual growth rate of the decade was 3.5% per cent, a very respectable considering that the invasion eliminated more than forty per cent of GDP. It was Europe and Greece in particular who had slow growth during the 1970s. It would not have hurt Phileleutheros if they did their research before re-publishing titles used in Greece.

By Alexander Apostolides on August 11, 2009

Interesting History – How the victory of the Fascists in the Spanish civil war saved Cyprus from invasion during the Second World War.

On 17th of July, 1936 the nationalist generals attempted to wrest control from the democratic socialist government in Spain. The result was one of the bloodiest civil wars in modern Europe, seen by many as a proxy war to the sides that would eventually fight in the Second World War. The war dragged on until the 1st of April in 1939, after much bloodshed. The reprisals of the Franco against its former enemies were awful, representing some of the most notorious crimes against humanity. As a result of the war Spain was ruled by the iron hand of dictatorship until 1975, and only became a democracy in 1978; it is noteworthy to see how far Spain managed to progress in economic, artistic and cultural spheres after decades of repression and state sponsored violence.

The nationalist side took an increasingly fascist ideology during the war. This was partly because of the increasing power of the falangist movement within the ranks of the nationalist army but mostly due to the fact that the generals were aided (in terms of men, materiel, tanks and air force) by Hitler and Mussolini, making a mockery of international agreements that prevented military aid to the combatants. Without the aid the generals attempt to wrest control from the government would have surely failed. However the aid came at a price: companies such as HISMA, ROWAK and SOFINDUS plundered Spain for raw materials both before and during the Second War World. Spain had to provide ore at bargain prices during the duration of the Second World War.

In the words of the historian Charles E. Harvey the Nazi regime of Germany was desperately trying to achieve autarky in raw materials, in order to be able to wage a sustained military campaign without facing the shortages of raw materials faced in the First World War. Out of most raw materials, Germany could not be self sufficient in four key materials: Oil, iron, copper, and sulphur (used in explosives production), as Germany simply did not have these elements in its territory.

Spain delivered over 9.4% of iron ore, 50% of copper pyrites and 85% of sulphur prior to the civil war, and the establishment of a friendly regime ensured that the supplies of these crucial raw materials would continue until well after d-day in 1944.

This undoubtedly saved Cyprus in 1941. With the start of the Spanish civil war, Spanish supplies to German chemical producers and smelters was halted; Cyprus, with the energetic American company, the Cyprus Mining Corporation at the forefront, filled the gap. The amounts of ore sent to Germany were tremendous, with up to 80% of all ore being sent to maintain Hitler’s drive to re-arm. Thus the copper sulfate ore from Cyprus ensured that the German re-militarization could continue at breakneck speed.

The invasion of Crete in May 1941 a costly success for Hitler. Since Germany could not control the seas, but controlled the skies in the Agean. Hitler launched the largest airdrop operation to that date; although the Germans took control of Crete, Hitler saw his crack paratroopers decimated. This put him off plans to invade Cyprus and Malta by air.

However if the Spanish civil war was won by the republicans, the situation might have been different. An invasion of Cyprus in order to gain crucial deposits iron, copper and sulfur ore might have been more tempting that an invasion of a militarized and victorious republican Spain. It was not unusual for Germany to invade territories for its resources: Polesti in Romania was occupied by the Germans to secure their oil supply, while vital manpower was diverted away from the attempt to capture Moscow in an attempt to wrest control of the oil and ore producing are of Baku in the Soviet Union.

For me this example shows that the history of one country can have a profound effect on the history of another, and that history can be taught to be a interesting and dynamic subject. It also emphasises how economics and politics can interact, and highlight the importance in understanding the economic motives of political actions.

By Alexander Apostolides on August 10, 2009

NY TIMES OP-ed misses the point about GDP.

Every two years there is somebody who claims the death of GDP as a tool in understanding wellbeing and measuring performance. Now even the New York Times has joined the band wagon.

As a person who has spent the last 4 year reconstructing the GDP I can tell you that a lot of what this article is saying is bull. One of the biggest criticisms is that DIY and household work is not included in the GDP. Yet that is a political decision and a decision of national accountants: household chores can be included if politicians agree that it is a worthwhile activity and Sweden has already included it in its GDP (and i agree with Sweden).

The author goes on and moans that drying your clothes does not increase GDP, while taking it to the dry cleaners increases output - failing to see that the difference is that in the first case there no increase in income, while in the other someone gets paid for the services thus creating a multiplier effect that makes the income of the country just a tiny bit better off.

The author then goes on to argue that an increase in GDP does nessesarily make people better off and argues the aftermath of Katerina shows that. That is simply a misunderstanding of GDP- since the income of individual in based how the income is divided among the people. Thus in the US case GDP has been rising but only the income of the top 1% has been rising due to increasing income inequality and the lack of redistribution of income by the government.

Basically the author is annoyed that despite prediction of a recovery, the GDP data showed a continuing downturn. People forget that long recessions (or day i say it depressions) are not an up / down process - there a is lot weak recovery and sudden reversals. The author also does not tell us that there are alternatives to GDP, such as the Human development index, that take a persons welfare into account - the author does not mention them since they show the problems of the USA, which falls from first to the 20th country in the world when education and life expectancy is added to the income per capita indicator.

New instruments such using advanced econometrical analysis that are capable in identifying weaknesses in the economy much more quickly are needed, but that is not what the author is demanding. Sadly I expected more from the NY times in terms of leading the global discussion about the need to change economic thought.

By Pandelis on August 04, 2009

The Prospects for the development of Health Tourism in Cyprus

Health Tourism is an ever increasing international trend, which only a few countries have fully exploited. The island nation of Cyprus has many advantages that may establish it as a preferred health tourism destination. This article gives a bird’s eye view of these advantages and potentials, along with the main steps that need to be taken for the further development of this particular industry in the island of Venus. A special reference is given to the related means provided by the Internet and especially to the Health Tourism Portal, a site created for the development of the Health Tourism Domain in Cyprus. This portal consists a powerful marketing and networking tool for the health tourism stakeholders, providing them the opportunity for effective promotion, locally and abroad.
Health Tourism: a Global Trend
Health tourism (also called medical travel or global healthcare) is the term coined by travel agencies and the mass media to describe the rapidly-growing practice of traveling across international borders to obtain health-related services. Such services include common procedures, as well as complex specialized operations, such as joint replacement, cardiac surgery and cosmetic surgeries.
The number of people traveling abroad in order to receive this kind of services is rapidly increasing and there are several reasons behind this trend. The most important of them are that prices at the health tourism destinations are better than at home, treatment can be received more promptly, facilities are more advanced and more alternative treatments are provided. Health tourism in its wider sense includes sports tourism and the wellness and fitness tourism. Actually, every type of health care is included in the term, psychiatry, alternative treatments, culinary tourism, accessible tourism and assisted living abroad, to name a few.
In some publications[1] is stated that health tourism has been recognized by over 100 countries as a national industry. However, it seems that it has not reached its full potential of development and this is partly due to the insufficient use of modern technology and particularly the internet. An additional problem that health tourism has to face is that the related measures of quality vary across the world and the comparison between countries is not an easy task.
The Prospects of Cyprus
The eastern Mediterranean island of Cyprus is among the world’s best-loved holiday and retirement destinations. The reasons for that extend way beyond the mere look at the island’s climatic charts. Easily capable of meeting the demands of today’s tourists, Cyprus is also one of the countries leading the drive to open up medical tourism to a wider audience.
The standard of health in Cyprus is considered to be very high and the Cyprus medical system is compared very favorably with that of other developed countries. This quality may be expressed by various health indicators, such as the infant mortality rate (which stands at 3.1 per 1.000 live births), the expectation of life at birth (77.0 years for males and 81.7 for females) and the number of persons per doctor, which stands at 395[2]. In addition, the doctors, nurses and technical medical staff of Cyprus health establishments have been trained in many EU countries and the USA. It follows that Cyprus has a very high potential in establishing itself as a preferred medical tourism destination.
A particular health tourism sector with high potentials for development in Cyprus is Wellness and Fitness Tourism, i.e. the supply of services oriented to people seeking optimal health and well being. The purpose is to achieve body, mind and spirit integration, in order each individual to live more fully within the human and natural community.
Wellness and fitness tourism makes the perfect complement to Medical Tourism and Cyprus boasts an extensive range of health and wellness spas, offering a broad range of traditional and alternative services. There are countless treatments available to soothe, rejuvenate and inspire. Thalassotherapy, traditional baths and hamams, beauty treatments and aromatherapy, hot stone massage and hydrotherapy are only a few of them. For physiotherapy and rehabilitation, a vast selection of modern and extensive sports facilities and gyms are available.
Another advantage that Cyprus possesses in the area of health tourism is the combination of medical treatment with leisure, making traveling for health purposes more attractive than simply receiving healthcare at home. Some local businesses and providers have already started pursuing the development of health tourism in Cyprus, particularly in the area of medical care and wellness and fitness. The first results seem very encouraging, since Cyprus has already earned itself an exceptional reputation as a leading international centre of clinical excellence, providing first-rate services at very competitive prices.
However, very few of the health-related enterprises and organizations have considered effective international promotion, this mostly attributed to the lack of effectual advertisement abroad, despite the available opportunities given by modern technology and in particular by the Internet.
Further Development of Health Tourism in Cyprus
Given the number of industries and sectors involved, the development of health tourism in Cyprus requires that the engaged firms, bodies and organizations (the stakeholders) must orchestrate and unify their efforts towards a single direction. In other words, the health tourism domain must integrate in order to be fully developed. Such a great accomplishment will not take place, without taking advantage the infinite potentials of communication, especially the Internet.
For that particular reason the Health Tourism Portal ( has been recently launched, a site which provides all the opportunities for the unification and effective promotion of Health Tourism in Cyprus. This portal may complement the efforts towards the development of health tourism in Cyprus, through organized advertisement, extension and promotion abroad. Thus it may provide a boost for this initiative, along with a fresh momentum and encouragement for further development.
The Health Tourism Portal was created for three primary reasons:
a) To facilitate the communication between the firms and bodies engaged in health tourism (the stakeholders) and unite them into an integrated industry, through active cooperation and exchange of knowledge, ideas and methodologies.
b) To promote and advertise the unique and differentiated services that Cyprus enterprises and bodies have to offer in the area of the health tourism.
c) To give the opportunity to every person, firm or organization outside Cyprus to have a uniform and precise concept of the merits and potentials of Cyprus in the particular field. In that manner, Cyprus will come to the full attention of health and medical tourism facilators, such as health tourism agents and brokers.
Health tourism is a wide industry and many benefits may be retrieved from the better collaboration of the engaged parties, as described above. On the contrary the lack of communication may result in inefficiency and lack of competitiveness in the sector. An increase to the degree of awareness may be realized via the participation of the engaged stakeholders into WebPages designed for that particular purpose, such as the Health Tourism Portal.
In addition to the above, the continuous interaction and communication of the health tourism stakeholders may result in additional opportunities for gainful investments and the participation to local and international networks. The benefits from such engagements are far from ignorable, since they include: a) lower promotion and advertisement costs, b) quick and easy access to new ideas and technologies, c) reduction of the capital requirements, d) more effective use of infrastructure, e) reduction of the risks involved in developing new services, f) increased effectiveness and efficiency and g) reinforcement of competitiveness of the entire sector.
One of the many services that the Health Tourism Portal provides to its members is the Forum, designed to be a discussion medium for the members who wish to establish an organization to promote the health tourism establishments in Cyprus. The Health Tourism Portal Forum provides a channel for creative discussion and exchange of knowledge, ideas and technology. Further on, given the many different health tourism services offered in Cyprus, it may create an environment of interaction, collaboration and formation of alliances between the health tourism stakeholders.
In that manner, the Health Tourism Portal Forum may act as a catalyst and motivator for the initiation of additional actions needed to deal with, one of them being the integration of the health tourism domain in Cyprus. The benefits from integrating the segments of health tourism into one domain are many. The most important of which them is that the actions concerned with the development of the health tourism sector will then be launched by an all-embracing legal entity, which may identify the common goals, marshal the stakeholders and ensure the sustainability of the entire domain.
Actions such as the ones facilitated by the Health Tourism Portal will put an end to the inefficiencies created by the relative fragmentation of health tourism in Cyprus and increase once and for all the effectiveness and international competitiveness of Cyprus in that area.
[1] Gahlinger P.M. (2008), The Medical Tourism Travel Guide: Your Complete Reference to Top-Quality, Low-Cost Dental, Cosmetic, Medical Care & Surgery Overseas, Sunrise River Press.
[2] Statistical Service of Cyprus (2008), Health and Hospital Statistics 2006, Printing Office of the Republic of Cyprus.

By Alexander Apostolides on August 03, 2009

So is he leaving or Staying: Marfin and the Central Bank of Cyprus

According to this report from Greece, Marfin Popular is staying after all. If you ask me the only person that came out worse out of that is the personal credibility of Mr. Vgenopoulos. It should seriously worry is if Mr. Vgenopoulos is the best we have to offer in Greek CEO's but thankfully they are better ones out there who do their job without getting into the spotlight for all the wrong reasons.

By Alexander Apostolides on June 12, 2009

"Mr. Marfin": Correct responce by the house of representatives.

Well done House. Unlike the government (with the president and the minister of economics on the forefront) the parliament is to bring "Mr. Marfin" into account for the frankly bullying behavior he has exhibited. The government just unfairly blamed XAK and the Central Bank of Cyprus.

I forgot to mention the scariest about the AGB of Marfin Laiki. Mr. Marfin expressed that the National Bank of Greece was quite small - a bank 5 times Marfin's size. I worry in how big he wants to make Laiki, and the consequences of such expansion.

By Alexander Apostolides on June 09, 2009

Orphanides vs Mr marfin - who is right?

I wanted to ask people in general as to who do you think is right on these issues - issues that according to "Mr. Marfin" were behind his decision to take Laiki to Athens.

1) Should a major shareholder be able to buy shares before and after major decisions are going to be announced for his company?
If you answered no, the you are right on the basis that the CEO / major shareholder could have access to information that the general public is unaware off – a way of insider trading. However Mr Vgenopoulos was furious that the head of the Cypriot central bank and the executive committee of the Cypriot stock exchange (XAK) enforced a closed period – so he lost the change to buy the a greater share of the bank when prices were down. Both (Central bank of Cyprus, XAK)have been doing their work perfectly and it is to them that we owe our thanks for our banks not being exposed to the global financial meltdown that is happening.

2) Is there a giant conspiracy network, operated by connection of the bank of Cyprus, to keep Bank of Cyprus supreme?
Personally I think that even if such a think existed it was in the past and it is not existing any more – Bank of Cyprus is just better at doing business and Cyprus is a tough market for any bank to increase its market share. In fact a former Bank of Cyprus man and now a minister of economics, Mr Stavrakis , publicly criticized the position of the head of the Central bank of Cyprus.

I anything the environment in Greece is much more murky than in Cyprus – and I fail to see what advantage Vgenopoulos will have in moving to Athens, other than the fact that he can control decision making in Athens, while the regulators have thwarted his attempts to do what he likes in Cyprus.

3) Was it a good idea not to allow Marfin to buy out Bank of Cyprus in 2007?

Some say that if we gave the bank to the interests behind Mr Vgenopoulos, then he might not have moved the central offices of Marfin out of Cyprus. .I actually think that since he was not willing to play within the regulatory framework, the central bank and the XAK was right in not trusting him with any such buy out. Can you imagine if Bank of Cyprus also left Cyprus, following a merger with Marfin?

What do you think?

By Alexander Apostolides on April 05, 2009

British Economic History Society Conference

I have been having a fantastic time at the economic history association conference – so many ideas and great names being so accessible. As usual however, there were no economists in attendance (other those who are traditionally involved in economic history). We have so much to give to each other’s disciplines – Bernankie and Romer are both very central to Obama’s administration, and have both been very active in economic history in the past.

And yet when reporters call up to ask if we are facing the great depression, economists, especially theoretical economists, do not seem to re-discover an interest in economic history. Instead the answers given are driven from outdated research. Such a shame that such a great opportunity to re-ignite a mutually fruitful relationship has been missed.

By Alexander Apostolides on April 01, 2009

A very good article on Obama's economic plan

A great article by pro-globalisation nobel price winner and former world bank peresident, Jospeph Stiglitz.Stiglitz argues that the taxpayer is the great looser from the current economic policy in the US.
In the article Stiglitz attacks the presidents economic policy, causing quite a controversy since it is comming from an economist that has great relations whith the Clinton white house.

By Michalis Zaouras on March 25, 2009

Where has rational expectations gone

I think this is very typical from a young economist to question. But the latest ponzi scheme that has hit the world financial markets, has raised this question again. To be honest the concept of the credit crunch crisis violates partially the idea of rational expectations, even though the bubble has been rationalized but an adaptation of expectations. To get to my main point, there has been quite a fuss with Madoff's ponzi scheme, 'deceiving' some of the elite in the financial market industry, starting from worldwide bank institutions to celebrities. Some of them pointing out that they were the victims of a plot designed by an ingenious, prestigious trader, excuse me for the abuse of defining Madoff as a trader. But is that all?

To make things clear, Madoff has been widely promising return on investment above 10% and in some cases as much as 47%. In my view there are two cases, these people were honestly declaring that they were tricked or they knew that there is something wrong going on but they were betting that Madoff will not get caught. Someone may believe that these attitudes are fully rational, but not in my view because the probability of this scheme to fail is almost one. It will fail because at some point when a crisis, negative productivity shock or demand driven shock you can call it as you want to, hit the financial market then he would not be able anymore to deliver the excess returns that he promised, because he will attract attention of the regulators and get caught. Also at this point, there will be no arrival of new clients, he will not have enough money to finance his promises to his existing clients, there will be deterioration of his position even further and as a result of that go bust. So why would anyone suspicious of a ponzi scheme join in, that is not rational at all.

To be honest there is a simple answer for my question, a person knowing of this scheme can join for a short time hoping to leave the scheme soon enough. For example, someone that has been promised a return of 15%, she can get the value of her money within 5 years, without reinvesting you will need 7 years. In contrast if you save with interest 5% you will need 15 years for your money to double. So you need the scheme to run successfully for a long period of time to find it worthwhile to join. To be more precise, you will need the scheme to survive into the medium run because we know that in the long run it will fail. But Madoff’s story with his scheme dating from 90’s and according to some from 80’s, points out that this is possible to achieve. It will be interesting though to see if any of Madoff’s clients left the scheme years before, or if they were reinvesting. If the last holds it makes them even more irrational because as the years passes, then the probability to get caught increases.

My answer to the statement above is a simple backwards induction argument, a rational investor who knows about the scheme and knows that it has been running for some time he will not enter because the probability of the scheme to be revealed to financial authorities is too high. This means that Madoff at medium run will have a bigger problem to find new clients even if a crisis is not around and the probability to fail to its promises increases, but then an investor at short run will not invest at all because the probability of failing even at medium run is too high. The backward induction argument holds, if we assume rational expectations.
I would like to close my comment with a great story that a friend of mine told me. During the 80's a guy had a car accident, he survived the accident but it caused him a reasoning problem, he became too rational. This is a true story and psychologists have explored further his case. An example of his reasoning problem is the following, when this guy wanted to have a lunch he had to choose first if he would take it at city centre or not, he would then visit all the places to find the most suitable one and then he would visit all the restaurants to get the best deal and at the end of all these, it was dinner time. So people are not as rational as we believe, based at least on our definition of rationality. Conclusion, are we missing something?

By Alexander Apostolides on March 20, 2009


I have to admit that I was intrigued by a comment posted concerning the current financial crisis and subsequent remarks concerning the resemblance of our current economic woes to the era known as the “Great Depression”. I have to admit though, that I was dismayed by the fact that consensus opinion in that comment appeared to be geared towards the argument that the importance of the current economic downturn trails by a relatively wide margin the severity of the economic woes experienced during 1929-1933. We maintain that this is not the case as the implications of the current downturn are too far-reaching and too serious to be dismissed as just another recession. We believe that the economic and social crisis just beginning, and worldwide demolition of wealth, are revealing the uncomfortable truth.

As you all know, the world economy is now entering an exceptionally uncertain phase which is subject to considerable downside risks. Although in the past we experienced many other economic downturns, also embodying financial crises (most notably US housing woes in the 80’s and also Sweden, Japan and Asia in the 90’s), we maintain that the origins, severity and magnitude of the current economic situation can only be paralleled to the Great Depression. Yet our capacity to learn from the Great Depression is limited because of different policy actions and because we do not know how economies would have evolved after 1938 if politics had not intervened.

We also maintain that current government policy is unprecedented and hence this reinforces our optimism that the US economy will not end up in a Great Depression as it did in in 1930. Hence the result is that we must now endure not Great Depression II, but Global Credit Crash I, with adequate government intervention spreading the pain over a number of years implying a shrinking credit system, slow economic growth and declining profits in the business sector for many years to come. Although this by default implies further drops in asset prices and additional banking woes and deflation we believe that this will be prevented (or reversed) via exploding budget deficits, which will push up interest rates so far, however, that asset prices will start falling too far again. Hence inflation could surge again steeply in the future as governments will have to respond to exploding budget deficits by artificially suppressing interest rates again. Also with governments and central banks bringing private sector losses onto their balance sheets, fiscal deficits soaring in the next two years and with the US Fed and the Treasury taking a massive amount of credit risk, the long-term solvency of the US government could be put at risk.

In drawing the parallels between the current state of economic affairs and 1929 we first have to examine the roots of the current economic cycle:

In the 1980’s and 1990’s more and more countries (in Asia and Eastern Europe) entered the global economic stage. As they developed their domestic economies, huge industries were created, mainly aming to produce for Western markets. At a macro-economic level this led to a transfer in prosperity from the West to the East whose magnitute would have normally led to economic contraction in the West and to high economic growth in the East. This process would have eventually come to a halt as the West should had lost the purchasing power needed to offset production in the East. Moreover, the currencies in Asia and SEE should have appreciated so much that their cost advantage would diminish.

None of the above developments took place because many Asian countries kept their currencies pegged to the dollar whereas a lot of Eastern European countries opted for a link with the Euro.

In addition the Western Economies started to grow fast because various factors systematically supressed inflation (emergence of densely populated economies after the fall of communism providing the West with cheap products plus a high rise in productivity combined with relativel low wage rises). As a result, interest rates continued to ease. Investment in assets became more profitable as asset prices surged further boosting consumer confidence. Simultaneously savings steadily decreased while consumption borrowing went up leading to corporations and lenders to look the future with more confidence based on the assumption that asset prices would continue to rise against a high growth environment and low inflation. In the end this became a self fullfiling prophecy as easing risk premiums, high growth and rising asset prices continued to reinforce each other. What actually happened is that the West lost a great deal of its competitive position to the East. It was able to disguise this for decades by means of a credit explosion. Unfortunately, this was used for more consumption instead of being invested to create a future source of income.

Thus to begin with, the cause of the current cycle is in the credit bubble inflated over the past few decades. The background against which the amount of credit has grown so rapidly is falling inflation from the 1980’s upwards. Due to falling inflation long term interest rates were also dragged down. The lower interest rates fell, the more asset prices rose. Virtually all asset classes prices rocketed upwards from 1990 upwards. While housing prices, in particular, were rising, debts were mounting, particularly those of consumers and financial institutions as consumers starting borrowing more to buy houses but also to consume more. After all real wages have hardly risen over the past few years and rising asset prices offered consumers sufficient security to save less and borrow more. Simultaneously it was assumed that asset prices would continue rising and growth would remain high.

The cycle of indebtedness became a reinforcing spiral as low inflationary expectations led to relative flat yield curves suggesting lower earned credit spreads on loans by financial institutions that were subsequently forced to increase the provision of credit facilities in order to ensure high profitability. Credit spreads would have widened as indebtedness increased but this was avoided via financial engineering (bundling and reselling loans and spreading risks through the Credit Default Swaps market). Credit spreads were also kept low by the fact that the Fed and the Central Bank of Japan kept pumping more liquidity into the system than the economy could absorb, in an attempt to fend off deflation (deflation is disastrous for highly indebted countries). In fact there was so much surpluss money into the income that bankers and fund managers had little option but to take increasingly high risks. Thus based on an over-rosy outlook too much was lent on over-easy conditions.

Under these conditions, housing prices in the United States rose by around 160% in the period between 1991 and 2006. Then inflation started rising (very high commodity prices and extremely low interest rates) so the conditions were no longer perfect for asset prices. The Fed had to raise interest rates in an attempt to curb inflation. As soon as housing prices fell by around 8% from their peak, the credit crisis broke out. The fact that housing prices only needed to fall by so little in relation to the preceding rise shows how unstable the system was. After all, it was based on the perfect conditions and outlook for asset prices and the debt mountain built on top.

Back into drawing the parallels to the Great Depression we have read and understood that the later at its peak it was effectively “collective insanity”. We also maintain that there are conflicting interpretations as to the causes of the mayhem. The bottom line though is that the Great Depression threw the survival of the economic system, and the political order into serious doubt. Similarly in 2008, markets and business leaders came to doubt the durability of the financial foundations that had supported consumption and asset price growth after the New Economy fiasco.

Various explanations have been put forward to explain the Great Depression. Some blame the failure of self-correcting mechanisms; others blame the low money supply suggesting that the Fed chose to follow the wrong policies. Given the exactly opposite nature of current government policies, we cannot identify any similarities to the current crisis from this viewpoint. Traditional monetary policy proved to be ineffective at the first stages of the current crisis, thus other unorthodox policies have been used including massive provision of liquidity to financial institutions to unclog the liquidity crunch and reduce the spread between short-term market rates and policy rates; quasi-fiscal policies to bail out investors, lenders and borrowers. Even more unorthodox policy actions were utilized in order to reduce the rising spread between long-term interest rates on government bonds and policy rates and the high spread of short-term and long-term market rates (mortgage rates, commercial paper and consumer credit) relative to short-term and long-term government bonds. Even though it is too early to give any credit to the above policies we do maintain though that if it were not for the trillions of dollars committed to current government interventionist policies then the Great Depression could be dwarfed by the meltdown that we would be faced with.

Other economists blame over-production and under consumption. We do not have any evidence to support if this is the case today. However we do point out that this is one of the dangers that we could face in the near future if the consumer credit bubble does not deflate in an orderly manner.
Another school of thought blames the 1929 downturn to increased protectionism that finally led to less demand for US produced goods. We cannot draw any parallels to today’s crisis, but we would like to point out that today, government policies are becoming more and more protectionist (remember Obama’s “Buy American” logo?).

Other economists (including Ben Bernanke) in explaining the Great Depression cite the inherent limitations imposed to policy makers by the gold standard. We also recall that another school of though further villifies the gold standard system by blaming it for transmitting the problem to the rest of the world. Although we do not have a gold standard today, we would like to point out that we do have the Euro and plenty of involuntary currency interventions.

We like the explanation put forward by several economists that consider the key reason for the Depression to be the expansion of the money supply in the 1920s that led to an unsustainable credit-driven boom. I am sure that you can all see the similarities here to the current crisis. We also like the explanation put forward by the Austrian School of economics which blame the easy credit policies of the Federal Reserve during the 1920s (similarities to Greenspan’s Fed after 2000 anyone?).

The next view on the causes of the Great Depression is very closely related to our current situation and relates loose credit to over-indebtedness, which fueled speculation and asset bubbles. We are sure that you can all see the parallels to today’s crisis.

Finally we would like to point out that as in today, back in the 1920’s there were structural weaknesses in banking. Graham and Dodd (the fathers of security analysis) argued that prior to the Great Depression major banks were holding over inflated risky equity investments while also they made risky loans based on an over-rosy outlook. Graham and Dodd also argued that part of the the credit boom of the 1920’s was brought by investment banks that underwrote bond issues by practically insolvent companies in order to meet investor demand for fixed income investments. We are sure that you have all spotted the striking similarities to the current crisis here.

As a last point, I would like remind you all that the US Economy is in recession since November 2007 (according to the Economic Bureau). The financial crisis emerged in September 2008 following the collapse of Lehman. If it was not for the Lehman debacle (and Fannie Mae and Freddy Mac a few days earlier) then AIG and WM would probably not have had their credit lines cut off – and AIG could had been able to roll-over its derrivatives positions successfully. Prior to that we just had the subprime collapse and the credit crunch thing (I think that both emerged to the surface in early to mid 2007 – but the actual slowdown in the US economy started in 2006). Both the Subprime crisis and the credit crunch were precursors to the current financial crisis (more like mini-crises) but they were by products of the economic slowdown and not trigger events for it. We also remind you that through the 1920’s thrift failures were also very common.