Building a functional federal state and financing the property settlement of the Cyprus problem have become matters of priority in the peace talks. The two leaders, Nicos Anastasiades and Mustafa Akinci have clearly indicated their purpose in the communique issued after their July 10 meeting.
“In today’s global economic climate it is essential that a functional, federal Cyprus is financially viable and committed to capitalising on the economic opportunities that will open up as a result of reaching a final settlement. This will be done in close cooperation with the relevant international financial institutions,” the leaders said in a joint statement.
The Cyprus Weekly understands that the Greek Cypriot and Turkish Cypriot negotiating teams, in close cooperation and with the help of the UN team on the island, have started seeking ways of getting assistance from the International Monetary Fund (IMF) and other international institutions, including the EU and the World Bank.
Anastasiades and Akinci have realised that with the global economy in difficulty they can’t expect to raise support by mobilising donor countries as was the case in 2004, just before the referendum for the Annan Plan. And even then donors had pledged only $400 million to Cyprus, a sum that could barely cover the initial cost of a peace deal.
The first objective is to seek help from IMF and the European Commission. In the initial stages this would involve technical assistance on how to make viable a federal system, with a central government and constituent states. Namely, how to smoothly pass from today’s de facto division to a workable federation, where revenues will be allocated between the central government and the two units, taxes will be collected and the underdeveloped north will be hormonised, economically and administratively, with the “europeanised” south. In that particular effort the assistance of the European Commission is paramount. In fact the harmonisation of north Cyprus has already started but now needs to move faster. The IMF has vast experience in helping “troubled” entities to pass to federal status. The two sides in Cyprus could also draw from the experience of Germany’s reunification in 1990.
Greek and Turkish Cypriots also need to focus on how to finance a property settlement.
The thorny issue is being discussed at this point and if there is progress, as expected, the leaders will be seeking funds to compensate owners that won’t be eligible for restitution. The Cyprus Weekly understands that UN envoy Espen Barth Eide, under his other hat as managing director of the World Economic Forum, believes firmly that the two sides should not be thinking how much a solution would cost, but how they could generate money from it. It’s a business approach to the economics of the Cyprus problem and the UN will have experts available to extensively brief the two leaders on how to make the most of this new thinking as far as property compensation is concerned.