Saturday, 22 March 2008

Cyprus: economy; income; conspicuous consumption

In one recent article on Cyprus, the Guardian commented that:
No barricade so conjures the island's division, or decades of failed reunification attempts, as much as Ledra, where bullet-pocked buildings remain frozen in time. Behind the barricades, Turkish Cypriots have lived in a world reminiscent of the 1970s while their Greek compatriots, buttressed by international recognition and more recently EU membership, enjoyed a vibrant cafe society, luxury cars and other tokens of one of Europe's most successful economies.
Leaving aside the possibility of the opening of Ledra Street, I want to query instead the perception of Cyprus's economy; I suspect that, despite its different circumstances, Cyprus resembles the US insofar as 'a lot of the growth in GDP per person -- that is, productivity -- has gone to profits, not wages'.

The Organisation for Economic Co-operation and Development (OECD) categorised the 1999 Republic of Cyprus as a country with a low middle income, in the third out of four groups ranked from high, to high middle, to low middle, to low income.

The United Nations' Human Development Report's Human Development Index gave the 2005 Republic of Cyprus 'a rank of 28th out of 177 countries with data' and, while I don't doubt that Cyprus 'enjoy[s] a vibrant cafe society, luxury cars and other tokens', I would question (based upon a lot of anecdotal evidence) whether it is 'one of Europe's most successful economies', or whether the conspicuous consumption of luxury goods is dangerously disconnected from real wages and economic security.

Southern Cyprus does have low unemployment and southern Cypriots may be 'among the most prosperous people in the Mediterranean region'; however, while they may enjoy coffee and cars, as Elias Hazou reported, 'Cypriots pay a lot for staple goods' - more than 25% more than Britons for 500g of spaghetti, more than 75% more for a litre of milk and more than 100% more for six eggs. Moreover, they have the 17th strongest purchasing power of 40 European countries' citizens and, in 2007, Cyprus's average income was only €12,344.

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