Cyprus turns to casinos to aid recovery

Cyprus has unveiled plans to sell casino licences and build a natural gas storage facility in a bid to kick-start a recovery following a banking collapse and a €23.5bn bailout by international lenders.

However, Nicos Anastasiades, president, warned a “difficult and trying period” lay ahead as Cypriots came to terms with a projected drop in national output of at least 12.5 per cent over the next two years, a 60 per cent haircut on uninsured bank deposits and a sharp rise in unemployment.

Cyprus also faces a challenging task to reinvent its services sector after relying for decades on tourism and providing offshore banking and legal services mainly for Russian and Ukrainian companies.

“If we are to succeed in reviving the economy and achieving a swift exit from the crisis, we must comply strictly with the terms of our loan agreement,” Mr Anastasiades said in a televised address to Cypriots on Friday evening.

“If we don’t implement a co-ordinated programme in a disciplined way . . . we will face even more painful consequences,” he added.

Cyprus has undertaken to sell a large chunk of its gold reserves, raise the corporate tax rate to 12.5 per cent, matching Ireland, and drastically restructure Bank of Cyprus, its largest lender, under terms of its bailout by the EU and International Monetary Fund.

Controls on capital movement, imposed as a temporary measure to avert a massive flight of funds, are curtailing business activity in an economy heavily dependent on imports.

Mr Anastasiades said the government would provide €21m to subsidise 6,000 jobs in tourism and make available tracts of state- and church-owned land at low rents for young farmers to grow cash crops.

“We need to revive sectors hit by the economic crisis,” he said, referring to construction and energy projects that were stalled as Cypriot banks faced a growing liquidity squeeze.

The government said it would also accelerate its renewable energy programme by immediately issuing licences to 24 companies that have already won tenders to develop photovoltaic parks, cutting the cost of fuel for electricity production by €51m annually.

To reinvigorate the island’s struggling construction sector, incentives for building new golf courses are being prepared and some restrictions on construction in urban areas would be lifted, Mr Anastasiades said.

A study on building casinos, banned until now by the influential Orthodox church of Cyprus, will be completed by next month.

However, the government said the natural gas terminal would be a medium-term project requiring co-operation with US and Israeli companies that are expected to develop seabed gas deposits located off southern Cyprus.

Mr Anastasiades said a second package of measures would be announced next month aimed at attracting investment in new financial services, and in research and technology.