August 22 - 28, 2012
FinancialMirror.com
4 | CYPRUS
Nadir theft trial jury still out The jury in the London trial of former fugitive tycoon Asil Nadir has been sent home after an eighth day of deliberations over theft charges, according to the Press Association. On Monday the ten jurors found Nadir, 71, guilty of three counts amounting to GBP 5.5 mln, and cleared him of a fourth count. Nadir is accused of plundering millions from his Polly Peck International business empire between 1987 and 1990. The Turkish Cypriot rags-to-riches-to-rags tycoon was found guilty of stealing GBP 1.3 mln to secretly buy Polly Peck shares to bolster its stock exchange price. He was also found guilty of stealing 1 mln spent on antiques and 3.25 mln which went to 19 different destinations. He was cleared of a fourth count of stealing GBP 2.5 mln and using it to pay his income tax bill. Nadir denied 13 counts of theft of GBP 34 mln. The prosecution says these are sample charges representing theft of GBP 150 mln from the company. During the seven month Old Bailey trial, two of the original jurors were discharged through ill health. The court heard that Nadir fled Britain in 1993 for his native northern Cyprus before he could be tried and returned voluntarily in 2010. He told the court he left because he was “a broken man without hope” and complained about the Serious Fraud Office investigation.
government - since it had received donations from Nadir. Wearing a dark suit, green tie and matching handkerchief in his top pocket, Nadir appeared shocked when the jury returned the guilty verdicts. Second wife Nur, 42 years his younger, left the court in tears and was taken away in a chauffeur-driven Jaguar.
SFO officers and other investigators could not extradite Nadir from occupied northern Cyprus because it is an illegal state with no sovereignty. Investigators were said to have found a “black hole” after going to northern Cyprus, where the money had been transferred, the court heard. Polly Peck International, a conglomerate dealing in fruit, leisure, textiles and electronics, was one of the success stories of the Thatcher era and one of the best-performing companies on the London Stock Exchange - but it collapsed in 1990 with debts of GBP 550 mln. Polly peck’s demise was one of Britain’s biggest corporate failures and was a huge embarrassment to the Conservative Party - which is now the senior partner in a two-party coalition
STELLAR RISE Philip Shears, prosecuting, said Nadir had transferred millions of pounds abroad through a complicated network of companies and banks. He had used some of the money to buy antiques, pay off debts and to prop up the price of Polly Peck shares, he said. A Conservative minister resigned over his links to Nadir after it emerged he had given the businessman a watch engraved with the message: “Don’t let the bastards grind you down.” Born in Cyprus in 1941, Nadir sold newspapers at the age of six before moving with his family to London in the 1950s. He bought the Polly Peck textiles company in the late 1970s and set about turning it into one of the biggest companies on the stock exchange. Its divisions ranged from consumer electronics to hotels and the Del Monte canned fruit business. He bankrolled Turkish Cypriot leader Rauf Denktash and the occupation regime in the north, operated the Jasmin hotel and casino and started the Kibris newspaper and TV station, until funds ran dry and was subsequently targeted by the regime.
Trade deficit (prelim) shrinks to 2.1 bln in H1
Cyprus ELA shoots to EUR 9.6 bln in July
The trade deficit shrank to EUR 2.1 bln in January-June 2012 from according to preliminary data, from EUR 2.5 bln in the same period of 2011. Imports/arrivals reached EUR 462.7 mln in June alone of which EUR 306.5 mln constituted arrivals from other member states of the EU and EUR 156.2 mln imports from third countries. Total exports/dispatches reached EUR 125.6 mln, of which EUR 77.4 mln were dispatches to other EU member states and EUR 48.2 mln exports to third countries. Meanwhile, according to full data for May total imports in January-May 2012 amounted to EUR 2,389.8 mln (EUR 2.4 bln) compared with EUR 2,643.2 mln in January-May 2011. Total exports/dispatches reached EUR 597.4mln compared with EUR 594.3 mln in January-May 2011. The trade deficit for JanuaryMay was EUR 1,792.4mln in January-May 2012 compared with EUR 2,048.8 mln in the corresponding period of 2011.
The absence of a government deal with the troika is leading to a growing liquidity crisis for one or more Cypriot banks, judging from the latest Central Bank data. “Other claims on euro area credit institutions denominated in euro”, the proxy for Emergency Liquidity Assistance (ELA), shot up to EUR 9.6 bln in July, from EUR 8 bln in June, EUR 5 bln in May and only EUR 130,563 in July 2011. Moreover, the increase is not entirely explained by the reduction in borrowing from the European Central Bank (ECB) after it refused to accept Republic of Cyprus bonds as collateral. “Lending to euro area credit institutions related to monetary policy operations denominated in euro”, the proxy for ECB liquidity assistance, did fall to EUR 3.7 bln in July from EUR 5.2 bln in June. However, the sum of assistance provided by the ELA and ECB rose to EUR 13.3 bln in July from EUR 13.2 bln in June and EUR 10.8 bln in May.
Tourism arrivals up 3.4% y/y in July l
Fewer from Mideast
Tourism arrivals rose over the year earlier by 3.4% in July to reach 371,453 compared with 359,104 in July 2011. The Russian market continued to surge ahead, with an increase of 40.7% to 79,278. Arrivals from Germany, the third largest market, rose by 13.5% to 12,785, while arrivals from Norway rose by 9.3% to 14,056. The UK market, which remains the largest, remained weak, however, with a drop of 9.1% to 141,782. There was also a 5.1% decrease from Sweden to 18,405 and a 3.4% fall from Greece to 15,355. Arrivals from the Middle East saw a big drop due to the escalating violence in the Middle East region: down 74.2% from Syria, 54,7% from Lebanon, -34,9% from Egypt and -6.6% from Israel.
Retail trade down prov 3.1% in Jan-May Retail trade declined by a provisional 3.1% compared with the year earlier in May according to preliminary figures, having dropped by 6.5% in April. Compared with the previous month, retail trade in May rose by a provisional 2.9%. In the period January-May 2012, retail trade volumes are provisionally estimated to have decreased by 2.7% compared with the corresponding period of 2011. The value index in January-May is provisionally estimated to have declined by 0.7%.
In May 2011 this total was only EUR 5.5 bln. Banks cannot access ECB assistance again until the deal with the troika (the ECB, European Commission and IMF) has been signed. However, since applying for the European Financial Stability Facility (EFSF) on June 29th the government has not put forward any reforms. Instead it has concentrated efforts on removing the heads of the two largest banks in order to place the blame on the crisis on the banking sector. Minutes leaked last week from the troika’s meeting with the House Finance Committee cited a European Commission official saying that the economic challenges stemmed both from fiscal imbalances and the banking sector and that the public finances “were in a worse shape than expected”. Fiona Mullen www.sapientaeconomics.com
Cyprus falls deeper into recession in Q2 l Fourth
straight q/q decline
As expected, the Cyprus economy fell deeper into recession in the second quarter, with real GDP declining on a seasonally adjusted basis by 2.4% compared with the same period of the previous year, after a drop of 1.5% in the first quarter. On a non-seasonally adjusted basis GDP fell by 2.3%, from 1.5% in Q1. On a quarterly basis, the economy has now recorded its fourth quarter of contraction, with GDP declining compared with the previous quarter by 0.8% on a seasonally adjusted basis, from 0.4% n the first quarter. A technical recession is recorded after two straight quarters of q/q decline. Full data will be released in about four weeks. The Statistical Service indicated that that decline was broadbased, with declines in construction, manufacturing, electricity, wholesale and retail trade, and transport. On the other hand, there were positive growth rates for tourism and, despite the capitalisation crisis that has hit business confidence, banking. Cyprus applied for financial support from the European Financial Stability Facility (EFSF) on June 29, having been locked out of financial markets since May 2011.
GDP growth, seasonally adjusted
r
However, the government has yet to agree to the terms. The EFSF is needed partly to shore up the capital of its two largest banks, which were badly hit by the writedown of Greek sovereign debt, but also cover some EUR 4.5 bln of government financing needs to the end of 2014. Estimates for the total amount required range from EUR 11 bln to EUR 15 bln (around 60% to 80% of GDP). www.sapientaeconomics.com