South Cyprus Banking Crisis
A TRNC Bank MD´s thoughts
by Ralph Kratzer
How will the banking crisis in Southern Cyprus affect the banks in the KKTC and Turkey?
The banks in the South are so in trouble because for years they gave too generous commitments to their clients regarding mortgages and interests, also the origin of the money was not always clear … They had been very open-hearted and open-minded …
Greek and Greek Cypriot banks, however, are intertwined.
In the contractual agreements between our two nations, the Cypriot banks are left out, so the TRNC is not directly affected by the crisis in the Republic of Cyprus.
However, investors who live here in the north, but have invested their money in the south are, unfortunately, affected.
Conservative forces in Southern Cyprus of course make the stalled political talks between North and South responsible for their own plight.
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How secure is the credit of the investors in the KKTC and Turkish banks?
Can we suffer from a similar banking crisis as in the South (or, as here in the North in the 1980s or beginning of this decade) in the near future?
The aforementioned crises in the 1980s and 2002, were then mastered very quickly, not least by the support of Turkey. Banks had not collapsed, the invested capital was safe, only the bank commitments regarding high interest rates could not be met in those days.
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How stable is the economic situation in the TRNC and Turkey assessed by you?
The inflation rate has largely stabilized. Regional economic weeknesses as e.g. in eastern Turkey cannot threaten the overall stability of the Turkish economy. A decline of this trend is not foreseeable.
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In your opinion, after what is happening in the south, how does the government of the TRNC and Turkey now think about a future EU accession?
There is no relationship between the banking crisis in Southern Cyprus and Turkey’s accession negotiations with the EU. Anyhow a possible EU membership of Turkey would not change Turkey’s relations with Northern Cyprus.
Meanwhile, however, trends are noticeable, that the Turkish government and the people of Turkey no longer unreservedly face an EU accession.
Economically, Turkey is already intertwined with the European Union for a long time.
Germany as the major EU power shows no interest in Turkey’s accession.
I believe, now the Turkish ship is sailing to another port.