ECONOMY

Cyprus faces prospect of being a net contributor to the EU

NICOSIA – Tiny but rich Cyprus faces the prospect of being a net contributor to the European Union budget when it eventually joins, since it could be too prosperous for community handouts to outweigh its financial input. The island of 700,000 people is poised to conclude its accession negotiations with the 15-member bloc by the end of 2002 and is a frontrunner in having provisionally closed some 23 of 29 negotiating chapters. The southern parts of the island under the effective authority of the Republic of Cyprus, which is negotiating membership, have a per capita GDP of 18,500 euros ($16,910), the highest among candidate countries. This is approximately 82 percent of the current EU average and well above the 75 percent threshold placed by the bloc for a country to be eligible for regional aid. As the situation stands at the moment, there is a possibility of Cyprus becoming a net contributor, Finance Minister Takis Clerides told Reuters. It is easy to say that (now), but rules and regulations of the EU could change, he said. The government plans to negotiate for exemptions, or derogations, which could change its contribution and intake makeup. One measure Nicosia has recommended would be to phase in its required contributions, accepting that because it is so tiny it needs a different set of rules. Citing its size, location and the existence of regional disparities, it has also asked to be included in the Objective 1 category of countries receiving regional funds whose GDP is below 75 percent of the EU norm, government economists say. Little monetary benefit Analysts said the prospect of Cyprus getting little back from the EU in money terms should come as no surprise. Its pre-accession aid is a fraction of what Central and Eastern European countries were receiving from the EU under various programs, which did not, unlike Cyprus, have market economies to start with. The GDP is now about 80 percent of the EU average. With that in mind I see some difficulties in Cyprus justifying regional aid outweighing its contributions to the EU, a European economist in Nicosia said. The GDP figures do not extend to the northern third of the island, a breakaway Turkish-Cypriot entity. That region is considerably poorer with a GDP roughly one third of the south. Obviously, if there were a political settlement before accession then the situation would change considerably, said the economist. At the moment the government appears unfazed at the prospect of being a net contributor and Clerides indicated that it will not break the bank. I think if we end up being a net contributor, which may be the case, it is going to be for a small amount, not for hundreds of millions of pounds, he said.