Scorpions’ “Wind of Change” is probably one of the most iconic rock songs of the early 90s. The song was composed following the band’s visit to the Soviet Union at the height of perestroika, when large-scale socioeconomic reforms were taking place across the Eastern Bloc. At the time, we bought singles on 7’’ vinyl; on the B-side, there was a less known song about greed, “Money and Fame”.
According to the songwriters, the quest for money and fame causes you to become emotionally detached and willing to take on more and more risk.
All you want is money and fame
You play, play with emotions
You need, need a stepping stone
You’re out, out for sensations
Don’t you, don’t you feel alone
Who’s to blame my love
You play a dangerous game
In Cyprus we are in the midst of three changes that will leave their mark on future generations:
1. The “Cyprus problem” is at a critical point, as the remaining negotiating card on the table, the ghost city of Famagusta, is going to be partially opened to inhabitants. As this plays out over the next months, it will become more evident that locals’ inability to negotiate an amicable solution will result to the status quo becoming the de facto solution.
2. Three non-performing loan portfolios will be coming onto the market by the end of the year (total gross book balance of €4.5bn). If these transact, the banking system will be substantially cleansed from its legacy non-performing loans. It will also mean that circa €20bn of loans will “sit” outside the banking system, compared to €50bn that will be in it, with a handful of companies having influence over a huge segment of Cypriot businesses and households.
3. Low government bond yields, negative interest rates on deposits by corporates, and limited alternative avenues to invest in have resulted in increasing demand for real estate, both to sell (as there is no income being generated from anywhere else, but the bills are piling up) and to buy (as there is a search-for-yield, cheap financing is available, and accumulation of wealth is increasing). The wealth gap is widening, with the middle class increasingly priced out of various properties probably for generations to come. The island is increasingly becoming even more uneven, unbalanced and unequal, further widening the gap between the real and the financial economy.
So what now?
It’s time to compromise. We are past denial, anger and bargaining but we are stuck in depression. We need to decisively move to acceptance and hence be comfortable with the fact that the island will be shared between the two communities, hopefully acting as a beacon of stability for the wider Eastern Mediterranean basin.
The economy needs to be reformed by increasing the digital transformation of the government apparatus, companies becoming even more outward looking and offering higher value services such as research & development, education, etc. Banks should take-on the unions to reduce their high, legacy labour costs and embrace business lending without asking for real estate collateral, personal guarantees, etc which tends to stiffen start-ups and companies light on physical assets. However, without many places to channel their excess liquidity locally, unless the “Cyprus problem” is resolved and infrastructure projects require financing, they should either expand or merge their operations with financial institutions overseas where there are more opportunities.
These actions need to be part of a strategic plan underpinning a wider vision for the country, setting out how it sees itself in a world where people can work from anywhere, where its own population is 20% from overseas, and where its economy has become even more interlinked with that of other countries. There is no place for nationalistic propaganda or time to waste for Cyprus’ politicians to pontificate, as the pandemic is causing a wave of reassessment and transformation to take place across economies globally.
When there is turbulence, there are opportunities for the brave to seize them. There is a distinction however between seizing opportunities for one’s personal gain or seizing them collectively for society to benefit. One can only hope and make themselves available to contribute, assist and challenge as needed.