Economy risks plunging in uncertainty after talks torpedoed


By Stelios Orphanides

The Cypriot economy may have entered a stage of uncertainty affecting investors’ decision-making as reunification talks are about to break down, considerably limiting any prospect of the island being reunited, an academic economist said.

“Now the optimistic scenario is the continuation of the status quo,” Sofronis Clerides who teaches at the University of Cyprus said in a telephone interview on Tuesday. “There can’t be anything better than this”.

Sofronis Clerides“The negative scenario provides for (geopolitical) tension and fait accomplis, which may impact economic performance and investment,” he said and added that the development of hydrocarbons and tourism may be sensitive to what is to come. On the other hand, a reunification of the island could unleash economic potential if functional.

Under the current status quo, which has the form of a fragile cease-fire overseen by United Nations peacekeepers, the northern part of Cyprus will continue to remain occupied by Turkey, which stations 30,000 soldiers in Cyprus since 1974 after it expelled Greek Cypriots who cannot use their properties. In 1987, Turkey imposed an embargo on Cypriot shipping, banning vessels owned or managed by Cypriot companies from entering Turkish ports.

In 1983, Turkish Cypriots declared the establishment of Turkish Republic of Northern Cyprus (TRNC), recognised by Turkey only since, which disputes Cyprus’s exclusive economic zone, in which the Republic of Cyprus aspires to explore and develop hydrocarbon reserves. Turkey which sent warships to the area in 2011, when Noble Energy carried out its first exploratory drill in block 12, is currently carrying out hydrocarbon exploration with its seismic vessel Barbaros.

On Monday, deputy government spokesman Victor Papadopoulos said that President Nicos Anastasiades decided to refer a law approved by lawmakers on April 7, effectively reversing an amendment passed by parliament in February proposed by the xenophobic Elam. The amendment angered Turkish Cypriots and prompted Turkish Cypriot leader to withdraw from reunification talks. Papadopoulos cited constitutionality concerns, a position held by politicians in favour of the initial amendment, which provided for the commemoration of the “Enosis referendum,” a petition signed by Greek Cypriots in 1950 demanding the unification to Greece.

Akinci and Anastasiades, who both supported in 2004 the UN-sponsored reunification plan which Greek Cypriots eventually rejected while Turkish Cypriots approved, resumed talks last week amid a poisonous atmosphere. Anastasiades’s decision to refer the new law to the Supreme Court is likely to again anger Akinci.

Clerides said that, while he does not rule out a further upgrading of the political status of Turkish Cypriots, he considers an agreed partition as unlikely.

Still, even in the case of agreed partition, the economy may still have to deal with uncertainty, said George Markides, a Limassol-based financial services consultant. “It depends on whether Turkey will (then) apply a good-neighbour policy,” he said, adding that he considers it unlikely. “Otherwise, half of Cyprus (stays) a grey zone with Turkey, Greece and UK as guarantors with an amputated and deeply problematic constitution”.

“The only thing that keeps us afloat is low taxation,” Markides continued. “If the environment becomes more insecure, then the risk will counterbalance any advantages”.

Barret KupelianBarret Kupelian, a UK-based Cypriot economist, said that while the public discussion of the economics of the solution lacked serious analytical thinking, more reminiscent of “coffeeshop talk” than reflective discourse, one should wonder whether the current situation is beneficial from an economic point of view.

“Any sensible analysis on the net economic benefits of the status quo should always be compared to the counterfactual of a sensible solution to the Cyprus problem being struck,” he said. “Every single credible academic study shows that the economics of co-operation trump the economics of confrontation. Cyprus is no exception to this”.

In the absence of reaching an agreement which could allow Turkey, currently the world’s 14th largest economy, from withdrawing its troops from the island, Cyprus will not be in position to take advantage of its vicinity to the country, which is expected to become by 2050, the world’s 11th largest economy, Kupelian said.

“Cyprus is uniquely positioned to take advantage of this growth spurt as a credible, stable and reputable business centre,” he said. “However, our leaders are consciously shooting themselves in the foot by choosing not to trade with the largest economy in the area, without providing for an alternative growth plan”.

An indication of the decision of Greek Cypriot politicians not to devote time and energy in discussing the economic benefits of a settlement may be the decision of finance minister Harris Georgiades not to attend an event organised by the Cyprus Association of Economists (CAE) at the Central Bank of Cyprus scheduled for April 27.

“The CAE announces that, due to the unforeseen absence of the honourable minister of finance abroad, who accompanies the President of the Republic of Cyprus in his visit to India, the event on ‘The Challenges of the Economic Aspect of the Solution to the Cyprus Problem,’ is postponed,” the association said in a statement emailed by the Central Bank of Cyprus on Tuesday.


About Author

Stelios Orphanides is a journalist at To contact Stelios Orphanides: [email protected]

  • Philippos

    Bravo Barrett, except its “shooting yourself in the wrong foot” Totally and utterly idiotic for the money grabbers of Cyprus. Polla Lefta Egei Mpre, stin Tourkeia kai den mporoume na paroume emas

  • Andreas Louca

    The solution proposed would not bring about economic miracle as proposed by all these economist , and liberal thinkers . How can we Trade with Turkey when she acts as an Guarantor , then invades and occupies 1/3 of the territory , resettles her own population on to the island and refuses to recognise the Republic of Cyprus. To safe guard Cyprus we need either a USA military base or a Russian military lease base, or a European Army / Army Navy Base . Next we need new investments incentives for Foreign investment , We had it before with the offshore companies . The economist held out economic growth in the area of Tourism , if we had accepted the Anan Plan in 2004 . WE have the economic boom now in the tourist mark, but has it improved the NPL and the economy as it should have , in 2004 , we had 3.5 % unemployment , now we have in excess of 12 % , and the outlook is for it to remain at 11-10 % over the next two years , not taking into account the number that have immigrated for work . Secondly , have these economist taken into account , the actual costs of a solution , the Three Government Bodies , with Civil service and the provision of health care to an addition 200000/300000 people ,and who picks up the the bill that Turkey has been subsidising the North ., and the compensation to be paid to both communities in a settlement . Look at Germany unification ??? and what it costs .

    • Martin Standage

      So in other words you prefer things to stay stay as they are and damn those of us on both sides who are desperate for a solution before we die,like so many others have already done?

    • Martin Standage

      What we definitely don’t need here is a Russian base-that country has already done more than enough damage!

  • BigApple

    Media scaremongering.

    • Martin Standage

      What scares me more is these establishment crooks here with high incomes, ugly mansions and luxury cars who are quite happy with the status-quo!

      • Slomi


        • John

          I have a 8 bedroom villa in the beautiful north and very happy with the status-qou unfortunately it’s sitting on Turkish land, shame really I’d be much happier had it been sitting on so called Greek land

      • BigApple

        this is true but not just in Cyprus, do you think Trump made his money based on honesty?.
        Many Limassolians became millionaires overnight after 1974 through selling their lands to the GCs who came down south. The land business exploded in the late 80’s and 90’s. The land near Santa Barbara sold for 25 million € back in the early 90’s!! Owned by one person whose grandfather won it in a card/poker game in the 1920’s!!. Then there are the big Lordos family who were big hoteliers in Famagusta whereas after 1974 they branched out into all areas of industry such as plastics, realty etc.

        Then of course the developer crooks such as Zavos etc who made their millions on cheating unsuspecting home buyers.

        Then there are the new rich families whose recent claim to the millionaire club is questionable but I know of a few that built businesses based on inheritances etc.

  • Andreas Louca

    martin standage , the solution purposed is Division and separation not unity . It is an effort to afford International recognition on the occupied territory , which in a few years after the solution would result in a breakaway , and the Turkish Cypriot community would become an extinct
    entity absorbed into Mainland Turkey through the invasion of mainland Turkish settlers as is happening right now , but to a greater degree . What we all want is unity and integration , whereby by in years to come we have a member of the Turkish Community as President and holding any high office in the island , who would look to greater good of the island and and its people , and there should be no down grading because of religion or language .

    • Martin Standage

      So what do you suggest we do,bearing in mind what is attainable, rather than desirable?This is the problem with the rejectionists who will be delighted if the current negotiations fail-yet they have nothing better to propose which will lead anywhere!

      • Frustrated

        The bottom line is that people don’t want a solution and only see any form of compromise as being either appeasing, traitorous, unpatriotic, selling out to Western interests, rewarding the invader or a million other reasons. In short, they want everything to return to how it was on 14th. July 1974 with one or two inconsequential tweaks which they know full well the other ‘side’ won’t accept.

        If I were a gambling man, I would say that WHEN, and not IF, the current round of talks finally breaks down in acrimony, the north/Turkey will take unilateral action and that’ll be that. No more talking – EVER.

        • John

          Spot on lol

    • John

      I nearly fell asleep reading that utter rubbish

  • Bruce

    Sofronis Clerides and other commentators fail to understand that the maintenance of the status quo with negative private saving, depressed private investment and NPLs at around 50% of gross bank loans can at best result in a sizable contraction in the rate of economic growth and at worst another financial crisis with the same incompetents at the Ministry of Finance, the Presidential Palace, and the Central Bank continuing to mismanage the ROC.

  • Stanlio

    The author of the article phones a couple of his mates – all of whose crass views on the Cyprus problem are well-known – bigs them up as experts on the Cypriot economy, they make trite points about what a boon it would be for Cyprus to be able to trade with Turkey, failing to mention not only the fact that Turkey’s economy is about to go down the toilet and investors are running away from it but also the obvious, which is that a bad solution – like the one Turkey wants – would wreck all the achievements of the Republic of Cyprus. Clerides, Markides and the other one have dubious agendas and shouldn’t be listened to.

  • Bjoern Luley

    No solution means no offshore gas and oil (if there is any at all)! That’s for sure! So the rejectionists and supporters of the status quo better think twice. And when they think, a Russian base in Cyprus would help their cause, that shows how little they know about politics, and that their real aims are personal profits and power. Papadopoulos as president would be the end of the RoC.

  • Andreas Louca

    John , what do you mean it was rubbish , The Federal Solution is partition , the Bi zonal , bi community is partition, unless my understanding of English is different , South Africa tried this and failed , so can you in your superior intellect explain , how this proposed Federation is not partition , and how two constitute states would work ,, when Foreigners would have more rights that fellow citizens in a Federation.

  • Andreas Louca

    martin standage , the Problem and main obstacle to a solution is the Presence of Turkey , its troops , settlers and influence .We have tackled these talks from the wrong position. It should have been under UN /Eu umbrella , with Turkey , for the removal of their Troops , settlers and influence , and with the Removal of Greek Troops and influence .First Stage , Next Stage should have been with Turkish Cypriots , in the meantime. UN/EU or Nato Troops and Police to maintain the position as it stands until a final solution could be worked out . This final solution could be advanced in stages , and integration , even with initial power sharing , not as in the old Constitution with Turkish Cypriots holding only second positions. The Property issue could be resolved through compensation , but the right to live anywhere to be enshrined. Education would held resolve attitudes . Social media has make the world more open and could help. Since we have been separated for close on 54 years , this process could be done over a period of 5/7 years . This is the only true solution, as the Federal Approach will eventually lead to conflict and permanent separation , as this is the mindset of Turkey since the 1940’s . We must integrate fully and embrace both sides of our inherent culture and customs .

    • Frustrated

      Whether any of us like it or not, there’s absolutely no way that Turkey will unilaterally withdraw its troops, repatriate settlers or diminish its “influence” one iota. This will only occur if and when both sides sit down and agree to compromise and come to an agreement. And not before.

      This wish list can be banged out as many times as you like but it’s an unachievable aspiration BEFORE an overall agreement is hammered out. Deep down I’m sure you must realize this.