The banking crisis in Cyprus has been having a knock-on effect on shipping companies operating from the island, the majority of them being ship management firms.

IBNA understands that there have already been problems with companies not being able to pay staff or cover ongoing business commitments due to the freezing of their accounts. In some cases contingency funding arrives from abroad, since the majority of such firms in Cyprus are representing foreign interests. Nevertheless, the situation is not encouraging, threatening to permanently unsettle another one of the island’s economic activity pillars.

However, economists and shipping professionals see the sector as a possible engine for growth in the future. The president of the Cyprus Union of Shipowners George Mouskas noted that the country is already cheaper than all its competitors in terms of registration and tonnage tax system, which by the way is the only system approved by the EU.

Attracting shipowners to the Cypriot flag, thus bringing in more income, is one of the policies under consideration at the government’s economic and business headquarters, according to one insider. Others though believe that shipping is an activity that has been considered as a given for too long now, without a proper plan to fully exploit its potential.

They point to the fact that both Greece and Cyprus have been overtaken by Malta in the number of vessels registered carrying its national maritime flag. “Inexplicable, really. Malta is not cheaper than us and has only recently applied to the EU for approval of its tonnage tax system,” said a Cypriot shipowner.

For the island’s shipping community the bet seems to be how to lure the great economic and reputational force that is the Greek shipowners. Something like 3,550 Greek-owned vessels are under a foreign register, yet only a few fly the Cypriot flag. Shipping professionals have told IBNA that the government seems willing to lower the already very low tonnage taxes in a bid to become even more competitive.

At the same time though the uncertainty over the banks and the accounts mobility is a suspending factor in any attempt, confirming the fears of those who said that destroying the banks of Cyprus would throw the whole economy ship in uncharted waters.