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BY THE NUMBERS MORE TROUBLE AHEAD FOR ANASTASIADES NICOS ANASTASIADES Position: President since February 2013 following a landslide win Age: 67 Profession: Lawyer Previously: Leader of Democratic Rally Party 1997-2013 (Conservative) Most known for: • Military conscription: proposed reduc- ing military service to 14 months • Cypriot federation: supported a 2004 proposal to unite Greek and Turkish Cy- prus in one federation • NATO: Supports the membership 1 MANAGE THE FALLOUT The stinging levy on large depositors at Laiki Bank will not only hurt Russian depositors but also local businessmen. The restructur- ing of both Laiki and Bank of Cyprus will also result in massive layoffs as the outsized financial industry shrinks. Anastasiades will also probably have to mend ties with Russia following the levy. 14.7% Unemployment rate 15% 12% 9% 6% 2008 2009 2010 2011 2012 2013 2 PRIVATIZE STATE ASSETS The bailout agreement requires the Cypriot government to continue to reduce public spending and privatize some state assets. The outgoing president, whose Communist Party still enjoys significant popular support, had rebuffed calls by the Troika to sell off profitable public enterprises in the telecom, infrastructure, and energy sectors. Anastasia- des will face an uphill battle to sell off assets especially at an unfavorable time. -5.5% Budget deficit as % of GDP 4% 2%. 0% -2% -4% -6% -8% 2003 2005 2007 2009 2011 3 REGAIN CREDITOR CONFIDENCE Junk-rated Cyprus has been shut out of mar- kets for two years, and although the bailout secures enough funds to recapitalize banks, it will be essential to re-open capital markets to the government and companies. This may be the most difficult of Anastasiades' tasks, es- pecially given that risks of deposit flight will continue to haunt the country for a long time. CCC S&P credit rating AA- A- BBB- Cut to junk BB- B- CC- 2010 2011 2012 2013 4 PLUMB THE DEPTHS FOR OIL Natural gas finds may be Cyprus's last hope for economic revival, but the sector is years away from pouring in any kind of revenue to the state. Previous finds by Noble Energy prompted a second round of licensing and agreements are likely in the first half of 2013. The island imports more than 95% of its en- ergy needs, but expects to go solo once gas begins to flow. $2.28bn Oil imports $2.5bn $2bn $1.5bn $1bn $0.5bn $0 2002 2004 2006 2008 2010 2012 5 FIND A NEW SOURCE OF GROWTH For the warm Mediterranean island, the finan- cial crisis may push it back to basics. Tourism, once the backbone of the Cypriot economy now accounts for less that 10% of GDP. The sector has remained strong despite the cri- sis, and may be an obvious sector to tap for growth in place of the expected scaling down of the financial industry. It's also the one industry where Russians and Germans have strong interests. Tourism revenues +11% €2m €1.75m €1.5m €1.25m 2009 2010 2011 2012 Visitor origins Others 26% United |Kingdom 39% Sweden 5% Greece 5% • Russia 19% Germany 6% CHRONOLOGY OF EVENTS Greek Cyprus joins the European Union Cyprus adopts the euro Economy badly hit by the global financial crisis Greece seals $146bn bailout from the IMF and Greece receives second bailout with bondholders, including Greek Cypriot banks, hit by debt restructuring eurozone S&P downgrades Cyprus sovereign debt on bank January S&P cuts Cyprus to junk; Cyprus receives €2.5bn 4.5- year loan from Russia at 4.5% exposure to Greece restructuring June Cyprus requests Troika bailout December Cyprus approves austerity budget to cut budget deficit February Center right presidential candidate Nicos Anastasiades March 19 Cyprus parliament rejects Troika proposal to tax all bank deposits in return for a €10bn loan sweeps to power with the promise of securing bailout from the Troika March 22 Russia refuses to provide more aid to Cyprus March 25 Cyprus and Troika agree deal to wind down Laiki Bank and restructure Bank of Cyprus. Depositors with over €100,000 face large losses Sources: Economena Analytics, Eurostat, IMF 2008 :2010 2013 :2004 2009 2011 2012