Cyprus has an overall 4.57 score compares to 5.60 for Switzerland which knocked the United States off the pedestal as the world’s most competitive economy, as the crash of the U.S. banking system left it more exposed to some long-standing weaknesses.

The WEF global competitiveness report 2009/2010 showed economies with a large focus on financial services such as the U.S., Britain or Iceland were the losers of the crisis.

The U.S as the world’s largest economy lost last year’s strong lead, slipping to number two for the first time since introduction of the index in its current form in 2004 with a 5.59 overall score.

‘We have been expecting for some time that it may lose its top position. There are a number of imbalances that have been building up’ said Jennifer Blanke, Head of the WEF’s Global Competitiveness Network.

‘There are problems on the financial market that we were not aware of before. These countries (like the U.S AND Britain) are getting penalised now’ she said. Trust in Swiss banks also declined.

Source: World Economic Forum

August 2009

IT’S official. The recovery has begun, according to the International Monetary Fund’s chief economist. But the nature of the rebound is likely to be slow and unpredictable.

”The recovery has started,” claimed Olivier Blanchard in a paper published by the IMF. ”Sustaining it will require delicate rebalancing acts, both within and across countries.”

He warned that recovery would be slow and complicated. ”The world is not in a run-of-the mill recession. The turnaround will not be simple. The crisis has left deep scars, which will affect both supply and demand for many years to come,” he said.

His comments followed news that Japan had become the latest major economy to return to growth in the second quarter, following a recovery in German and French GDP. But the British economy shrank by 0.8 per cent in the second quarter, according to the Office for National Statistics.

Adam Posen, who will join the Bank of England’s monetary policy committee next month, said on Tuesday that Britain, along with the US, Italy and Spain, was ”lagging” in economic recovery.

In his paper, Sustaining a Global Recovery, Dr Blanchard said the United States, the epicentre of the crisis, was ”central to any world recovery”.

He said two rebalancing acts would have to come into play to sustain the global recovery: a switch from public to private spending and the rebalancing of international trade flows.

The latter would require ”a shift from domestic to foreign demand in the United States and a reverse shift from foreign to domestic demand in the rest of the world, particularly in Asia”, he said.

”US net exports must increase” for the US recovery to occur, he said.

”From the point of view of the United States, a decrease in China’s current account surplus would help increase demand, and sustain the US recovery. That would result in more US imports, which would help sustain world recovery,” the IMF economist said.

China may be willing to pursue that ”because it may well be in its own interest”, but other emerging Asian economies that ran large current account surpluses had weaker incentives to boost internal demand.

In a typical recession model, he said, lower-than-normal growth gave way to higher-than-normal growth for some time, until the economy returned to its normal growth path.

”The current global recession is far from normal,” he said, citing the breakdown in parts of the economic system.

”In advanced countries the financial systems are partly dysfunctional and will take a long time to find their new shape,” he said.

Emerging market countries may not see dwindled capital inflows return to pre-crisis levels for a few years. The end result of the global crisis was possibly a permanently lower level of potential output, he said.

Read the full report here

The Memorandum of Understanding defines a general framework of mutual cooperation and exchange of information between the two supervisory authorities, for the purpose of facilitating the performance of their supervisory function as well as the effective supervision and regulation of credit institutions with cross border presence, in accordance with the respective national laws and regulations.

(kindly hosted by GGI Member Eliades & Partners)

The above reaffirms the Cyprus government’s position that the fiscal policy it has been following is the right one, which secures the highest possible growth rate in very adverse external relations.

The initialing of the agreement between Cyprus and the Russian Federation was signed on April 16th, thus paving the way for Cyprus’ removal from the Russian black list once the agreement comes into effect.  The Protocol was signed in Nicosia by Finance Minister Charilaos Stavrakis and Director of the Department of Tax and Customs Tariffs Policy, at the Russian Ministry of Finance Ilya Trunin.

A second agreement to avoid double taxation was also signed by Cyprus and the Czech Republic on Tuesday 28th April, again by Minister Stavrakis and the Czech Ambassador in Nicosia Jan Bandy as part of the programme to increase the agreement with European and other countries.  The agreement will greatly contribute to the development of commercial and financial relations between Cyprus and the Czech Republic.

The Cyprus government follows a “calculated financial and social policy” to safeguard the island state from world financial crisis.  Without ruling out any fallout from the global financial crisis, the calculated financial and social policy would continue to benefit the people, especially those in need.  The economy of Cyprus appears to be affected by the global financial crisis but to a lesser degree compared to all other European economies.

The Cypriot Minister said that the additional protocol opens a new chapter in the economic and commercial ties of Cyprus and Italy and “removes Cyprus from the so-called black list of Italy”, thus solving pending tax issues of the past seven years between the two states. The Cypriot Minister said, is now ready to welcome Italian investors who can make their investments in the Russian, Eastern European and other markets through Cyprus.

The additional protocol of the Convention on the Avoidance of Double Taxation between the two states provides for the exchange of bank and other information based on the Convention on the Avoidance of Double Taxation of the Organization for Economic Cooperation and Development (OECD).

Napolitano noted that the additional protocol further enhances the “already excellent bilateral commercial relations”. Pointing out that Italy is the second most important export country in Cyprus, Napolitano said that Italian businesspeople “have a golden chance” to discover and make use of Cyprus’ advantages, services and support to enter markets which are connected to the network of investments and services of the island. “The same will be possible for Cypriot investors and businesspeople in Italy”, he noted. The Italian Ambassador said that “this new tool we have in our hands will not only enhance our economic cooperation but it will also develop further bilateral ties in general”.

The Conference Program