ECONOMY

Cypriots adopt Euroskeptic approach as integration with EU hits consumers

NICOSIA – As the clock ticks ever closer to their island’s landmark EU accession on May 1, Greek Cypriots, pounded by a barrage of tax hikes, are becoming more Euroskeptic by the day. Cyprus until recently prided itself on its Europhile credentials with not a whiff of dissent among politicians or the wider population about the possible downside of monetary and political union with Brussels. Moreover, there was no debate on the pros and cons of accession as Cyprus was the only enlargement candidate not to have a referendum on EU entry. Instead, accession was unanimously approved in Parliament. This was mainly because the decision to join the bloc was a political one, as divided Cyprus sought membership of the powerful club to check Turkish expansionism. The Turkish Cypriots in a breakaway statelet in northern Cyprus, meanwhile, have formed a new government headed by Mehmet Ali Talat, a supporter of reunification based on a UN plan before the island joins the EU. Cyprus has been divided since 1974, when Turkish troops seized its northern third in response to an Athens-engineered Greek-Cypriot military coup seeking to unite the island with Greece. Whatever the reason, across-the-board price increases, mainly due to the introduction of value-added tax (VAT), currently running at 15 percent, the minimum permitted level in the EU, have sparked widespread discontent. «Increase in the cost of living is a problem but we are going through the most difficult stage where people have yet to see the benefits,» Cyprus’s EU harmonization coordinator Takis Hadzidemetriou told AFP. He said the transitional period was the most troublesome as Cyprus pushes through hundreds of laws affecting industry, agriculture and retail. Hadzidemetriou also conceded there has been a lack of debate about the impact of accession on everyday life, leaving Cypriots clueless about the consequences of joining up. «We are facing problems and difficulties which need to be addressed through public dialogue with people and groups,» said the official. Inevitably, increases in the price of cigarettes, alcohol and fuel have proved unpopular, with only a friendlier tax regime making new cars more affordable, offsetting the upward trend. Things are set to get worse for consumers with a 5 to 15 percent VAT levy earmarked for water supply, books, magazines, newspapers and children’s wear. While the maximum 15 percent will be introduced on children’s clothing and footwear, subsidies will also be scrapped on water, milk and wheat. Moreover, potato farmers and vinegrowers, two key agricultural sectors, will no longer receive fixed prices for their crops. Potato farmers could take disruptive action over subsidy losses, following the path of truckers who cost the economy $200 million when protesting against EU license regulations last October. «People haven’t realized the full impact (of accession). They are now beginning to realize and there is a bit of unrest,» economist Costas Apostolides said. He said the problem was compounded by the previous administration’s delaying of «unpopular decisions» before the February 2003 elections, leaving the new government with a stockpile of tough measures to implement. Although fledgling Euroskepticism may not be a dominant force, Apostolides said that the current discontent is fueled by a sluggish economy and uncertainty over what is to come. «The unrest is also because the economy only grew 2 percent last year, which is four times the EU average but low for our standards,» he said, predicting the economy would pick up on improved tourism arrivals in 2004. In the meantime, Cyprus is putting together its report to the European Commission on strides it has made to fulfill its harmonization obligations. Cyprus was rapped on the knuckles by the Commission last November over maritime ship inspections and failure to create an agricultural payment agency, both of which, Hadzidemetriou says, have now been put right. «I think we are back on track with the outstanding problems being resolved,» said the official. Cyprus is the wealthiest – in GDP per capita terms – among the 10 acceding states but is becoming increasingly aware that EU membership carries an expensive price tag.