ECONOMY

A costly reunification

NICOSIA – Cyprus’s government and central bank expressed concern yesterday at the economic viability of a complex UN plan designed to reunite the divided island after decades of partition. The blueprint, which mediators say is the only realistic way to end the division of Cyprus, would relink the island under a loose federation with two largely autonomous areas and a central government. Estimates of the reunification bill vary from a mere 3.6 billion pounds ($6.8 billion) cited by opposition politicians to the government’s forecast of 13 billion – almost double the combined gross domestic product of both estranged regions. «This plan needs drastic and substantive changes if any settlement is to be economically viable,» Central Bank Governor Christodoulos Christodoulou said. Christodoulou was responding to comments by a former Cypriot president who has said the economic impact of reunification would be beneficial, even if the plan were taken at face value. George Vassiliou, a liberal economist who headed Cyprus’s drive to get into the European Union, presented an impact study on Thursday. He said a settlement would boost growth rates, spur foreign investment and slash budget deficits. «I had hoped this would initiate a healthy discussion,» Vassiliou said. The Greek-Cypriot side enjoys a per capita GDP exceeding 80 percent of the EU average while the impoverished Turkish-Cypriot north of the island wilts under international trade restrictions. The central bank on the Greek-Cypriot side has said the plan raises more questions than answers. Concerns range from state revenues to expenditure, the burden of effectively running a multitier government, how to raise money for reconstruction and how to compensate those who will lose property in the deal. The blueprint floats the idea of establishing a fund for dispossessed persons, who will be paid in compensation bonds redeemable for cash after an unspecified period. Greek-Cypriot authorities estimate the cost of property compensation at perhaps 10 billion pounds.