The country is deep in negotiations with the EU, IMF and European Central Bank over a recapitalisation package that would see approximately €11bn ploughed into the country’s banking sector, which is suffering from its exposure to Greek debt.
However, a number of key European lawmakers have objected to the aid package as they claim Cyprus’ regulatory regime promotes tax evasion and is a haven for Russian money laundering.
The country has hired FTI Consulting to help fight its corner during the negotiations and correct what it believes to be misconceptions with regard to its tax regime.
The Cyprus Investment Promotion Agency (CIPA) initially held competitive pitches late last year for a brief to increase foreign direct investments into the Cypriot economy.
However, as the bailout talks intensified and with a Presidential election looming in mid-February, the account has morphed into supporting key Cypriot institutions.
The agency is working with the CIPA, the Ministry of Finance and the Central Bank, offering comms support and advice during the recapitalisation process.
Neil Doyle, MD in FTI’s strategic comms practice, said: ‘We are trying to provide balance to what has been biased coverage on what is really going on… The Cypriot story is a positive one, but the underlying story isn’t coming out.’
He explained that accusations around the country’s attitude to money laundering and tax evasion were ‘legacy issues’ from a period before its 2008 membership of the EU when the country operated as an offshore financial centre.
Doyle said Cyprus now has ‘world class anti-money laundering rules and enforcement’ and that an IMF study recently ranked the country’s anti-money laundering measures above many EU contemporaries.
Doyle is leading FTI's current engagement alongside senior MD Cleopatra Kitti and MD Paul Marriott.
The agency will take up its inward investment brief after the conclusion of troika talks and the Cypriot election, when President Dimitris Christofias will stand down.
FTI will work primarily in the UK, Russia and Ukraine to generate international investment in five key sectors of the Cypriot economy: energy, financial services, professional services, TMT and shipping.
The government has particularly high hopes for the nation’s nascent energy sector after around 7 trillion cubic feet of natural gas were found off the Cyprus coast in late 2011.
Christopher Clark, MD, will lead the inward investment brief.
FTI Consulting has previously worked with the governments of Hungary and Iceland, and the Bank of Spain during their respective financial recapitalisations.
-Cyprus’ banking sector is five times the size of its entire economy, according to the The Wall Street Journal, and held Greek loans and bonds worth 160 per cent of GDP in 2011.
-German Chancellor Angela Merkel is calling for regulatory and economic reform and privatisations before supporting a bailout.
-Christofias categorically rejects the privatisation of state-owned firms.