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By Peter Stevenson MEMBERS of Volunteer Doctors Cyprus have treated around 350 people at their free clinic in Nicosia since it opened three months ago, while two more, one in Paphos and one in Polis are due to open today. Limassol also has a free clinic, which was opened only last month, and plans have been drawn ...
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Cyprus Internet Directory [ Grim warning from employers ]

Grim warning from employers

AS the New Year dawns, both industry and the retail sector will start feeling the sting from a sluggish economy, and cash-flow problems could force businesses to shut shop.

The gloomy outlook was made yesterday by the Employers and Industrialists’ Federation OEV after meeting with Central Bank governor Athanasios Orphanides.

Citing its own data, the business community said that in 2009 the economy would grow by 1.5 or 1.6 per cent – even worse than government estimates of 1.8 per cent.

“We have spoken about this with the governor of the Central Bank, and he agreed that economic growth forecasts will probably need to be revised downwards,” OEV head Andreas Pittas told reporters later.

During their meeting with the CB governor, Pittas said, they raised issues “that are of concern to our members, namely, the real economy.

“We informed the governor that we predict a bad year for 2009, and of the fact that our members face two major problems. The first is poor competitiveness, that is, the high interest rates, and the second is lack of liquidity which means that businesses will have greater difficulty in securing loans,” said Pittas.

As a result, companies that have gone out on a limb would be unable to see through their short to medium-term business plans, he added.

Tourism and construction were the two most obvious victims of the economic slowdown, although manufacturing could also suffer the consequences.

“We are already receiving a number of complaints from members who cannot get the loans they need from banks,” said Pittas.

During yesterday’s meeting, OEV complained also about the fact commercial banks were diverting deposits abroad, and asked the CB to step in to stem the outflow of much-needed cash. The response from the CB was that there was little it could do in this regard.

Responding to questions, Pittas confirmed that there was a real and present danger of businesses going bust, but added: “At this moment, this problem is not so acute, but perhaps it will come up in 2009 or 2010.”

OEV is urging the CB to do what it can to relax interest rates, which could inject some life back into the sagging economy.

But commercial banks are unlikely to lower their rates anytime soon, saying they have liquidity problems of their own. If anything, the cost of lending is expected to go up come 2009.

Earlier this month, the government announced a scheme whereby it would be issuing €1.4 billion in treasury notes in a bid to boost the banking sector’s liquidity. The state will be borrowing €1.4 billion from commercial banks, who will then get their money back by taking out a loan for the same amount from the European Central Bank (ECB) but at a significantly lower interest rate, at 2.5 per cent, the ECB’s reference interest rate.

Since the government would deposit about half of the €1.4 billion back into the banks, the latter’s liquidity would be boosted by some €700 million.

At least that was the theory behind the scheme. But hopes that this would allow banks to offer better credit terms to businesses were all but dashed a day later, when the association of commercial banks said they had no scope to cut rates.


(Source: Cyprus Mail)
Copyright © Cyprus Mail 2008 Please contact Cyprus Mail for the copyright terms of this article.



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