In re-electing Nicos Anastasiades last month, Cyprus chose a steady hand on the presidential tiller. But the 71-year-old faces a difficult balancing act as he tries to steer the island’s recovering economy through diplomatic waters that have become choppier following this week’s latest confrontation with neighbouring Turkey.
On top of the stalemate that resulted from the latest re-unification talks between Turkish and Greek Cypriots, Turkey’s President Recep Tayyip Erdogan, has been flexing his muscles over gas drilling rights off the coast, and Cyprus and the UK are bracing for the impact that Brexit will have on their bilateral relationship. However, for the moment, it appears to be business as usual economically for the 850,000 inhabitants living on the more prosperous Greek Cypriot side of the island, which has been manned by a United Nations peacekeeping force since 1974.
Things have been going so well that, in October, Fitch Ratings agency upgraded the country’s long-term debt in foreign currency to one notch below investment grade – seen as a significant landmark, as it indicates the risk of default.
It came less than five years after Cyprus was rescued by a 10 billion euro economic package from the Eurogroup and the International Monetary Fund. However, the speedy recovery came as no surprise to Dr. James Ker-Lindsay, professor of politics and policy at St Mary’s University, London.
“Although Cyprus is divided and has a UN peacekeeping force, it has been an economic success story,” he said. “The economic collapse in Cyprus was related to what was happening in Greece, but the basic root causes were fundamentally different.” Having joined the European Union in 2004, and the Eurozone four years later, Cyprus had to tighten regulations that had earned it a tax-haven reputation and, in exchange for the March 2013 bailout, the government agreed to close the Cyprus Popular Bank, which had invested heavily in Greek bonds.
“Any country that loses one of its two big banks, they are going to feel it, but people have been surprised just how resilient Cyprus was, it has essentially bounced back and the growth rate is looking very healthy,” Ker-Lindsay said. “Anastasiades does deserve the credit. He has an exceptionally good finance minister in Harris Georgiades, who’s received plaudits for what he’s done. The government, on that front, has done a very good job.”
However, trickle-down economics have not worked sufficiently enough to prevent one in three young people in Cyprus from being unemployed. Fiona Mullen of Sapienta Economics, who has studied the likely effects of Cyprus reuniting, noted that among those who are employed are PhD graduates serving coffee, and businesses and households deeply in debt. Mullen predicts that both Turkish and Greek Cypriots would benefit from unification, both economically and politically.
The latest attempt to reach an agreement brought together Anastasiades, Turkish Cypriot leader Mustafa Akıncı, representatives from Britain, Greece, and Turkey, and UN Secretary General Antonio Guterres. But the talks broke up in July, seven months after their initial meeting in Geneva. Guterres issued a report in September in which he suggested that an agreement had been closer than ever before, but that “a historic opportunity was missed”.
Ker-Lindsay, who was himself part of the British delegation, believes that “the talks collapsed in such acrimony” that the prospect of fresh negotiations seems fairly limited in the short term. “The sides were relatively close,” he said. “Perhaps not as close as some like to think, but they were relatively close in a number of issues and, with the right political will, I think it would have been possible to reach an agreement. He noted that “it came down to three or four key issues and it was about how to trade off one versus the other and it just wasn’t possible to square that circle.”
Ker-Lindsay believes that Guterres “feels burnt by it all” and, with issues like Syria, Ukraine, global warming and internal UN issues to deal with, he “hasn’t got time to be the seventh secretary general getting tied up on Cyprus.”
“I think the UN is going to be looking to see what the two sides do in the coming period to see if they really are trying to show proper goodwill, not just to the UN but also to each other,” he said. That will not have been helped by Turkish warships blocking an exploration rig from Italian company ENI drilling for gas off the Cyprus coast last Friday. The EU responded by telling Turkey this week to respect its members’ territory, with President Erdogan then issuing a warning to Greece, Cyprus and foreign companies not to encroach on his country’s waters.
Ker-Lindsay explains that, despite the fact that the Turkish Republic of Northern Cyprus has only ever been diplomatically recognised by Turkey, and no other state, nor the EU, the Turkish Cypriot authorities are demanding a share in any offshore cash bonanza. “What we’ve seen in the past few days are the very worrying signs of re-emerging tension over the exploration,” he said. “The real problem in all of this is that, at one stage, we were looking at Turkey joining the European Union.” He noted that varying political decisions on the part of Turkey have lowered the possibility of this coming to fruition.
“And Erdogan, the Turkish president, he is a very unpredictable character and he’s been making some very belligerent statements recently, which are making people very nervous.” Ker-Lindsay referenced Erdogan’s visit to Greece in December, when he created discord during Turkey’s first presidential visit to Cyprus in 65 years by raising the prospect of reviewing the 1923 Treaty of Lausanne, which Turkey still claims gave them the rights to Cyprus’s northern territory.
What some view as Erdogan’s hankering for a return to Ottoman Empire expansionism comes at a moment in history when Britain and Cyprus are determining how to move forward in their bilateral relations. Having been granted independence from Britain in 1961, Cyprus’s shores still house UK military bases. “It is a very sensitive relationship Britain has with Cyprus because of Brexit,” Ker-Lindsay says. “[The UK] has got the bases there, there’s a large UK community there, there is a large Cypriot community in Britain. “It’s a relationship that has been in a very good place in recent years, and a lot of building of ties, and Brexit raises a whole bunch of serious problems.”
President Anastasiades will have plenty to keep him busy during his second five-year term. However, it seems that the Cypriot Parliament will lend a hand in his efforts to reunify the island. Ker-Lindsay pointed out that Anastasiades’s victory over independent Stavros Malas offers more opportunity for support from the House of Representatives. “Anastasiades is probably in a better position to see an agreement through, if he can be persuaded to reach a settlement.”