ECONOMY

Cypriot businessmen divided

«If you vote with your heart, you will vote ‘no’ (to the Annan plan for the reunification of Cyprus in Saturday’s referendum). If you vote with the mind and according to logic, you will vote ‘yes.’» Thus says a Greek-Cypriot businessman now based in Greece and previously in London, without any activity in, or financial ties to, Cyprus. «Voting ‘no’ frightens me because it has an unpredictable element. And, under certain circumstances, the unpredictable is dangerous,» he continues. Acceptance of the plan for the reunification of Cyprus presented by UN Secretary-General Kofi Annan will create the conditions for a permanent peace, which is good for the economy, despite the burdens the Annan plan implies. Indeed, accepting the plan implies a bigger cost for the Greek-Cypriot side. However, business will provide the answers to any problem arising for the benefit of both sides involved, our man believes. He gives as an example the reunification of Germany, although he hastens to add that he considers it a valid example only insofar as the economic consequences of reunification and the long-term advantages of a unified state are concerned. On the other hand, rejecting the Annan plan, that is, deciding that a non-solution is better than a solution, opens a new, very uncertain chapter which has not been adequately analyzed, the Greek-Cypriot businessman says, adding that the political gain from the Republic of Cyprus’s accession to the European Union has been overestimated. Accession is not a cure-all, he says, and those who do not understand that Cyprus’s political clout within the EU is very limited are naive. «Opinions over whether to vote ‘yes’ or ‘no’ in the referendum are divided among Cyprus’s business community,» says a Greek Cypriot, a top-ranking manager at a multinational firm, who lives in Athens but retains strong family ties with the island. Having followed developments on the issue closely, he believes that the Annan plan is not about balancing the demands of Cyprus’s two communities but about historical precedent, since it is heavily premised on the previous London and Zurich agreements, signed 45 years ago, and which gave birth to the Republic of Cyprus. For Greek-Cypriot business people, a «yes» or «no» vote in the referendum is also related to their business interests. Most big businessmen tend to be negative toward the Annan plan. This attitude comes from the certainty that businesses will be called upon to pay part of the costs of reunification – for which estimates vary between 2 and 6 billion euros – in the form of higher taxes. No business owner would accept a solution that would have a negative impact on the business. They point to the German reunification as an example of the heavy cost it inflicted on the wealthier West Germans. For this group of business people, Cyprus’s accession to the European Union is the country’s major advantage – and future bargaining chip. They also believe there is no political risk in rejecting the Annan plan, in the form of a future incident with the Turkish Cypriots and Turkey that could adversely affect economic development. There are also those in favor of the Annan plan. These are the businesspeople who look forward to significant gains after reunification. They include businesspeople active in the tourism industry and who have significant properties in the area of Famagusta. The reparations they are expected to receive, or the benefits from property returned to them, would offset any costs in the form of higher taxes or expenditures to revamp their returned property. Beyond emotive, psychological and political reasons, most Cypriot citizens, whether businesspeople or not, have also taken account of economic criteria, including the cost of reunification and the long transition period until they are able to freely buy property throughout the island, in rejecting the Annan plan. The Republic of Cyprus has built a strong economy. Living standards in the Greek-Cypriot south are far higher than in the Turkish-occupied north. It is estimated that the per capita gross domestic product (GDP) in the north is only 30 percent that of the south. Greek Cypriots are fully aware that Turkish Cypriots will gain from a reunification, while they may face years of stagnant growth until incomes become comparable. According to experts, bringing the north’s GDP to about 85 percent that of the south would require about 15 years. This is a long time to wait, says the Greek-Cypriot top manager to Kathimerini. However, we should not forget that Cyprus took about 15 years following the 1974 Turkish invasion to build a strong economy based on services. But, the essence of the Annan plan is neither the cost of reunification nor any investment opportunities, according to the Greek-Cypriot manager. «If the division of Cyprus is not resolved, and even if the Turkish-Cypriot so-called ‘state’ is not diplomatically recognized, it is almost certain that it will be recognized as an economic entity. (That is, the embargo affecting the Turkish-occupied north will be lifted.) Economic recognition will open the way to investment and help the Turkish-Cypriot economy grow. On the other hand, what will prevent Turkey from strengthening its military presence on the island, thereby creating tension and negatively affecting investments in southern Cyprus? As a full member of the EU, the Republic of Cyprus will neither contribute significantly to, nor get big sums from, the EU budget. Thus, being an EU member provides a certain security but does not eliminate risk,» he says. Thus, if we take into account all aspects of the Annan plan, «no one can call it unacceptable. If we still dream, even if we do not admit it, of a Cyprus model as it was for the past 30 years, we are at least living in the clouds,» he says.