long-Term Political Risk Rating And Sub-Components, Source: BMI - -- -- -- -- -- -- -- -- -- Long Term Political Rating Characteristics of polity Characteristics of society Scope of state Policy continuity Cyprus rotating EU presidency in the second half of ---- yielded little result on this matter, given the island economy s growing funding difficulties and banking sector crisis. With no agreement is reached during the EU presidency, we see a risk that the current round of negotiations will collapse as the UN steps back from the issue. ...Government Position Weak: The emergence of a new centre- right government following the February ---- presidential elec- tion does not automatically suggest a stronger political mandate. Difficult reforms and sharp spending cuts will potentially alienate the incoming administration in parliament and could leave any future coalition agreement vulnerable to defections and legisla- tive impasse, particularly in light of difficult choices that need to be made in order to qualify for bailout funds. Long-term political risk rating Cyprus score of --.- (out of ---) is low for a eurozone country, and is largely due to the island s division, both geographically and along ethnic lines. ...Northern Cyprus becomes increas- ingly isolated from everywhere except Ankara, posing a threat to security and raising concerns about organised crime close to the EU border. An infuriated Turkey steps up its own search for gas reserves off the coast of Northern Cyprus, deploying a military guard that increases tensions throughout the Eastern
...While we believe that Cyprus will continue to deliver on its promises un- der the ---- Troika bailout package, there are some near-term risks to the government led by President Nicos Anastasiades. The departure of the junior member of the ruling coalition has left Anastasiades s DISY party without a majority in government, and public protests threaten to derail key legislation. ...Among other provisions of the plan, the government must overhaul the social welfare system by consolidating a complex web of benefits and introducing a minimum income programme. The government also needs to change inefficient and often lax bankruptcy and debt collection laws, and most controversially in the wake of the bailout, has already seized private bank deposits (albeit mostly of higher net worth indi- viduals living abroad and leaving their money in Cyprus for tax purposes) and imposed capital controls to avoid money escaping from the country. At present, the government is grappling with privatising key state-owned companies in order to raise billions of euros toward its bailout programme. ...Following DIKO s departure from the government, and major strikes and street protests, the Cyp- riot parliament in February voted narrowly against a key bill that would have privatised state-owned companies (including telecoms, power, and port companies). The loss of the junior coalition partner also meant that a cabinet reshuffle was neces- - Business Monitor International Ltd www CYPRUS Q- ----
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