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Cyprus Update

Regular readers will note I hastily added a blog entry on Cyprus at the beginning of January as I'd inadvertently left it out of my analyses for 2013.

Cyprus has been regularly hailed as a great place to buy a holiday or retirement home. You can take it from me that it's not. I did warn that the whole island is in turmoil due to the presence of alleged Russian mafia money, and that the local banks are not solvent, and that the government is in a hopeless mess.

Scarcely two weeks after my article we have news that Cyprus has asked the EU for a bailout, and Germany has put it's foot down and refused to deal under present circumstances.

The bailout needed (€17 billion) is roughly equivalent to a year's budget for the Cyprus government. It would take the Cyprus economy into the same league as the Greek economy, and we all know what that is like.

Once again, Cyprus, like Greece, is a country that should never have been allowed to join the eurozone. The links with Russian mafia were well known as the country has been used for money laundering purposes for some considerable time.

Now Germany is asking Russia to step in and help with the bailout as Russian dirty money is at the centre of the banking scandal. That doesn't sound like a story that is going to have a happy ending. I cant see Russian president Putin agreeing to bankroll the illegal exit of roubles. And I cant see why German tax payers should subsidise Russian crooks. It has the makings of yet another awful mess.

The last thing you want is to be stuck with real estate in the wretched island. Steer well clear. Whatever deal is thrown at you, dont even look. It would be madness to invest there. Things can only get worse, much worse.

The big problem Cyprus has to cope with is that it's prosperity rests upon two main forms of income: tourist money which includes continuing sales of apartments; and the financial centre, which is now imploding just as the housing market has already imploded. That leaves Cyprus with a crashed economy. Scratch it from the list.


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