It's all about the number of blocks you are processing.
Reduce the View distance in chunks and it will become nicer.
You don't need to reduce much as it is a quadratic relation:
Half the distance means 4 times less blocks to process.
Also, as far as I know, the server side of Minecraft is the one causing the problems, as it is single threaded.
2 GB of RAM is far more then Minecraft server need. The real problem is the CPU.
Getting a CPU with more cores/threads will not help as it is single threaded processing. But if you have a very low frequency CPU, like 1.5Ghz then getting a faster CPU will help(like 4.0ghz)