THE Dragons’ Den star was born in Limassol, Cyprus, and brought by his family to the UK as a child.

Here the entrepreneur, who still has strong links with the island, explains why he feels the EU is to blame for its financial problems – and why Britain should reconsider its position in Europe.

CYPRUS, for me, will always be home. I have lots of friends and family there, including my mother. I have a house there and visit several times a year.

It’s a beautiful place full of friendly, hard-working people and that’s what makes its financial situation so incredibly sad.

How has this tiny island, that was prosperous and thriving only five years ago, found itself staring into the abyss?

One reason is the enormous loans made by Cypriot banks to Greece.

It frustrates me when people confuse Cypriots with Greeks.

We may share a similar language with Greece, but we do not share any of the issues that have brought so many problems to that country.

Comparing Cyprus with Greece is like comparing chalk and cheese.

In Cyprus, we have a long-standing relationship with Britain.

Cyprus was once a British colony and is a member of the Commonwealth.

We drive on the correct side of the road, our electrical sockets are the same as British ones and growing up in Cyprus I had to learn English to get on.

Cypriots are entrepreneurial people. We pay our taxes and have always had high employment and good jobs on offer.

The real problems stem from the fact that, as an island nation, the two main sources of income in Cyprus were tourism and financial services.

The financial sector was allowed to grow out of control and our banking system rocketed to the equivalent of eight times gross domestic product (GDP) — more than double what it should be. Since 2007 Cyprus has been focusing on financial services — all under the watch of the European Central Bank (ECB) — and the banking system grew from being worth around 78billion euros to around 126billion euros.

Cyprus was encouraged to make loans to Greece by the Eurozone, including German Chancellor Angela Merkel.

This was negotiated by the ECB — but has turned out to have cost the country dearly.

Now, Cyprus must raise 5.8billion euros in order to qualify for a 10billion euro bailout from the EU and International Monetary Fund (IMF).

When I heard about the plan to ensure the proposed bailout by taking money from everyday Cypriots — from the country’s pensioners and savers and families — I was astounded.

It’s a disgraceful idea.

Why should people who get up and go to work every day be penalised for something entirely out of their control?

Confidence in the banking system — and the Eurozone — is now at an all-time low in Cyprus.

Banks are shut and there are long queues at cash machines, which are then closed down too as they run out of money.

Like thousands of other pensioners and savers in Cyprus, my mother is very anxious about what is going to happen to the money she has saved in the bank.

Luckily, I’m in the fortunate position to be able to tell her she doesn’t need to worry — but many do not have the same luxury.

To the EU, the amount needed by Cyprus to qualify for a bailout is petty cash, an insignificant amount.

But they are using the island as a test case. If they are allowed to get away with this savings raid in Cyprus, then Italy, Greece, Portugal and Spain will be next.

This week Cypriot politicians agreed on a one-off levy of 20 per cent on deposits above 100,000 euros (£85,000) at the country’s largest bank, the Bank of Cyprus.

A tax of four per cent will be applied on deposits of 100,000 euros at other banks.

Some still hope that a cautious Russia will provide an economic lifeline to the island.

Personally, I don’t feel taking a loan from Russia would be in the best interests of Cyprus, either.

After all, we’re in the EU, we shouldn’t have to go outside it for help.

It was a weak move for the newly elected Cypriot President, Nicos Anastasiades, to even present the idea of this savings raid to the people.

Instead, why not issue a government bond?

Tell Cypriots their country needs them and encourage them to put 20 per cent of their savings into a government savings bond — and so into their country. Cyprus has vast natural reserves and has nationalised industries that can be used to secure the bonds.

Across the Eurozone, it’s clear that Germany is the only economy that’s weathering the financial storm engulfing the continent.

So instead of discussing whether Cyprus and others should leave the single currency, Merkel and her finance minister should be focusing on getting Germany out of the Eurozone.

That way, countries such as Spain, Italy, Portugal and Greece could all keep the euro, devalue to the rate that suits them and Germany can have the Deutschmark back.

I had always been in two minds about whether the UK should join the euro. But, as a Cypriot and a businessman, I feel this episode has shown we were entirely right to steer clear.

I feel the UK should have a free trade agreement with the EU — and nothing more.

We are our own nation, so let us make our own laws and our own rules. Brussels can keep their edicts. Watching George Osborne make the Budget statement last week, I was struck again by how similar Britain and Cyprus are.

An Englishman’s home is his castle and the same goes for Cypriots. People there want to work hard, buy their own home and get on.

I was pleased to see Mr Osborne made it a priority to free up the housing market, although this should have been done two years ago.

Getting people moving gets the economy flowing.

However, gimmicks such as a penny off the price of beer are not doing anyone any favours — I’d need to drink 100 pints just to save a quid.

But Britain is getting there.

It might be a slow and painful recovery but retail figures are looking good, and my businesses on the High Street are all doing well, expanding and creating new jobs.

It’s important not to talk ourselves back into a recession and, although like many others I sometimes feel like banging politicians’ heads together, Britain is on the road to recovery.

I sincerely hope that this week Cyprus will be able to say that too.


4 Responses to Theo Paphitis talks about the Cyprus Bail out

  1. Kay Demetriou says:

    I wholeheartedly agree with Theo! Well said.

    However, I do believe the problems in Cyprus will escalate as the Cypriots start drilling for oil. Especially as President Obama has said that Turkey should also be entitled to the oil because they have been there for so many years.

    Firstly, who rattled his cage? What on earth does he have to do with Cyprus when America is on the other side of the planet?
    As well as the fact that every super power wants a piece of our small and beautiful island.)

    And secondly, he has completely ignored the fact that the invasion from mainland Turkey was – and still is – illegal.

    Sadly, I believe Cyprus is in for a very rocky road ahead.

  2. John Mills says:

    I absolutely agree with you Kay!

  3. Marcel says:

    curious thesises:
    1.) You can’t mix the help in favour of Greece (which every EU-country had pro rata) mainly via cash-neutral guarantees with your collapsing bank sector.

    2.) EU decided to reduce Cyprus spending behaviour for avoiding regular help request, how the sum of EUR 5.8 billion was generated was a matter of Cyprus’ government

    3.) Cyprus’ banks granted loans for credit interests 10 times higher than in other EUR-countries, so immens sums were deposited in Cyprus and due to low-level interest the systems was collapsing. This was under the control of Cyprus government, not ECB.

    4.) UK is willing to get out of the EU because they don’t want to pay for the struggling south european countries any longer. You just can be member of EU or not, if not you got toll-charges of for goods approx. 10% (im- and export). A heavy Impact for UK finally.

    5.) UK is doing well? Well, Britain is in front of recession no. 5 in 3 years only. GDP -0.3% in 4Q12 as issued today

    6.) Scenario of Germany’s exit of EU: toll-charges for remaining EU-members 10%, reduction of EU-spendings of 25% (German part), the weak economy in South Europe gets even harder impacts due to toll-charges, lack of monetary EU-support, economy fluctuation to stable markets like Germany … all resulting finally in a high Inflation of EUR-currency, so that forks can afford less and less.

    It’s a bad time for all Europeans finally, but finally we will get stronger afterwards. It’s just important to realize the own mistakes and don’t say the others are guilty only.

  4. D. Demetriou says:

    I don’t agree with something Mr. Paphitis says regarding Germany leaving the Eurozone. If they did something like that and went back to the Mark, that would only decrease there amounts of exports.
    Germany is a product exporter and has flourished mainly because of the Euro as it has allowed other countries in the EU to be able to acquire things with no exchange differences. If they do go back to the Mark and other Southern European countries devaluate the euro, Germany’s exports will simply decrease as they will be too expensive for Euro holders to buy!

Leave a Reply