By Alexandros Achilleos

The ratification of the new cash-for-reforms agreement between Greece and its international creditors in recent days has brought a sigh of relief to the Cypriot business community, a spokesman for the Cyprus Employers and Industrialists Federation said.

Michael Antoniou, assistant director general of the business group, which is widely known by its Greek acronym OEV, said that the major problem Cypriot companies dealing with Greece faced was related with capital controls imposed by the government in Athens in late June, in an attempt to prevent a further outflow of deposits after it rejected a last minute proposal to extend the country’s programme.

Capital controls, accompanied by a three-week bank holiday, affected payments of companies dealing with Greek counterparts, said Antoniou who was commenting in a telephone interview today. He added that no “particular difficulties” arose with the exception of payments.

Several European parliaments of contributor countries to the third Greek bailout, including that of Germany, Finland and the Netherlands, ratified the new €86bn agreement in the past two weeks after Greek lawmakers did so days before. It is Greece’s third bailout in six years and allows the country to remain a member of the euro area.

According to people with knowledge of the situation, the three-week bank-holiday and the capital controls prompted several business people to travel either from Greece to Cyprus and from Cyprus to Greece to pay in cash for the purchase of goods and services.

Apart from the direct consequences Cypriot companies experienced as a result of the Greek banking crisis, the Cypriot economy saw a negative effect on foreign investor interest “as many aspiring investors” consider the Cypriot and Greek economies as interlinked, Antoniou said.

While instability in the Greek economy could bring some short-term benefits for the Cypriot economy, in the long-run, the impact is negative, Antoniou added.
One of the short-term benefits Cyprus experienced from the Greek crisis, was in the form of a deposits inflow from Greece amid doubts the country would remain a member of the single currency bloc.

As a result of the deposits outflow from the Greek banking system before the imposition of capital controls, Bank of Cyprus saw its deposits increase, a source at the lender with knowledge of the situation said on condition of anonymity.