BBC World Service

Economy of Cyprus in peril

Marketplace Staff Jul 28, 2011
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BBC World Service

Economy of Cyprus in peril

Marketplace Staff Jul 28, 2011
HTML EMBED:
COPY

Steve Chiotakis: On the island of Cyprus all the cabinet members have handed in their resignations. There’s been economic turmoil on the island in the past few weeks from power disruptions and from a credit downgrade from Moody’s. Meaning it could be the fourth European country to need a bail-out.

The BBC’s Tabitha Morgan is with us now from Nicosia, Cyprus. Hi, Tabitha.

Tabitha Morgan Hello.

Chiotakis: I know Cyprus is well-connected to Greece. How exposed is it to the problems — the Greek debt problems going on?

Morgan: First of all the Cypriot banks are more robustly structured shall we say than the Greek banks. So I don’t think they’re in any danger of folding any time soon. But there has been for some time now considerable concern that they are very exposed to the Greek banks in particular. And this has been I think one of the major reasons why the island has recently been downgraded by one of the major agencies. The island’s growth forecasts have also been reduced at the same time. Largely due to an additional complication — namely the destruction of the island’s main electricity generating plant in a freak explosion a couple of weeks ago.

Chiotakis: How damaging has that munitions blast been — I mean to the economy on Cyprus.

Morgan: This is the height of the tourist season in Cyprus. Tourism is the mainstay of the Cypriot economy. The power outages which have ensued from the loss of the power plant have been unpredictable. The electricity authorities are not able to tell anyone when they’re going to be. As you can imagine, these are having devastating consequences for businesses who can’t plan — who can’t reschedule — who can’t anticipate. It’s also having a hugely damaging effect on the retail sectors. Shops just don’t have any alternative — they have to close for the power cuts.

Chiotakis: The BBC’s Tabitha Morgan. Tabitha, thank you.

Morgan: Thank you.

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