By Fiona Mullen
Talks to resolve the Cyprus problem start earlier than expected on Friday, and all of a sudden, after more than ten years and lots of tears, people are daring to hope again that a solution might be possible.
According to research, the hardcore ‘no’ vote among Greek Cypriots is about 25%. Interestingly, it is the same size as the hardcore ‘yes’ vote. That leaves a very large 50% of undecided voters.
These people will be swayed by whoever has the best strategy for the referendum.
The strategists always win
It is an appropriate moment, therefore, to take stock of what has happened in the recent and more distant past.
First, let’s look at the recent election in the UK, where the Conservatives won not only a second term, but an outright majority that no one had expected.
According to The Guardian, one of the reasons why the Conservatives won was because they had a well-planned strategy, devised one year in advance, and based on opinion poll research.
These polls told them that voters still had lingering doubts about Labour’s ability to manage the economy.
Gut instincts are hard to unseat
This was despite the boom happening in the middle of a long period of Labour government.
It therefore goes to the crux of the point I am trying to make. People have their gut instincts, based sometimes on ancient history or plain untruths, and these instincts are hard to unseat.
Now let us look at what happened in the referendum on the Annan Plan in 2004, which was accepted by 65% of Turkish Cypriots but rejected by 76% of Greek Cypriots. Whatever you think of the content of the plan, it is clear that a key reason for the overwhelming ‘no’ vote was a meticulously organised and well-funded campaign.
Among the many doubts thrown at voters was the impact on the economy.
One of the most effective tools was the Planning Bureau’s report estimating the infamous ‘CYP 16 billion’ cost of a solution.
I have seen this report. It covered all kinds of things and threw in an awful lot of ‘nice-to-haves’, like golf courses, football pitches, mosques and churches. Everyone assumed that this would be funded by the taxpayer.
The biggest item in the report was property compensation. This was simply cited as CYP 10 billion, without a single word on how they reached this figure.
Timing was key
Then there was the research carried out by Eichmann and Wyplosz on the property provisions of the third version of the Annan Plan (Annan 3). In Annan 3, property compensation would be paid with government bonds. The authors quite rightly raised questions about its impact on fiscal stability.
The UN listened, and in fifth and final version of the plan (Annan 5), bonds would constitute only one-third of the payment; the remaining two-thirds would be paid in the form of ‘property appreciation certificates’.
This means that dispossessed owners who did not get their property back would benefit from the rise in price of the property that ended up in Turkish Cypriot hands.
This notion is based on the difference in prices that prevail in northern Cyprus today: ‘Greek title’ sells for less than ‘Turkish title’, precisely because of the legal impediment. Solve the Cyprus problem, however, and the prices of ‘Greek titles’ will rapidly converge with those of ‘Turkish title’. Who better to benefit from this increase than the Greek Cypriot who lost his or her property?
But this was not how things were argued. Instead, quite cannily, the Eichmann and Wyplosz concerns about Annan 3 were leaked about a week before the referendum on Annan 5.
It was splashed across the pages of all the loyal newspapers without bothering to mention that it was based on provisions that had now been radically altered.
Being of the few people who had actually read all five versions of the plan, I phoned Professor Wyplosz and asked him what he thought of Annan 5.
“I feel there are a number of very important changes which are a great improvement.
“The first is the whole property restitution process. … In the new system the federal government is only liable to one-third of value… That makes the whole different between the potentially bankrupt government and not,” said Wyplosz.
This was published in the Financial Mirror. But with only four days to go before the referendum, it was far too late to change anyone’s mind.
‘It’s the economy, stupid’
What do these lessons tell us about the focus of the ‘no’ campaign next time?
They will focus on feelings of insecurity. This means primarily physical insecurity (“security issues came out of a clear blue sky”, said former UN envoy, de Soto).
But after the crisis of 2013 it will also mean economic insecurity.
People will ask how the property settlement can be financed. There are answers to this. The private sector can play an important role, for example. But these answers need to be fleshed out with international experts and communicated.
They will ask how long Turkey will continue to finance the Turkish Cypriots and if it stops, where the money will come from.
There can be answers to these questions too. But they need technical experts from the European Commission (the guardians of the Stability and Growth Pact) to work out a detailed plan.
There will be similar questions about the banking system: requirements for eurozone banks have changed dramatically in the past few years and the Turkish Cypriot banking system will need a lot of technical support.
Countering these concerns by reminding everyone of the significant economic benefits, as I have been doing for the past decade, is important.
But it will not be enough. By the time people open the curtain to vote on referendum day, real answers to real questions will need to have been given.
The work on answering those questions needs to start right now.
The writer is Director of Sapienta Economics and author of the monthly Sapienta Country Analysis Cyprus www.sapientaeconomics.com