‘Cypriot eurozone membership could halt island’s reunification’

Mehmet Ali Talat, the president of Turkish northern Cyprus, has warned that Greek Cypriot membership of the eurozone could hinder reunification of the island. But in an interview, Talat ruled out unilaterally adopting the euro in response.

Speaking after the European Commission announced that the Republic of Cyprus could join the eurozone on 1 January 2008, Talat expressed fears that the Greek Cypriot government would seek to capitalise on euro membership to reinforce divisions on the island.

"It would be an opportunity if the Greek Cypriots acted in a positive way. But as they are trying to consolidate the restrictions on Turkish Cypriots [it could play] a very negative role," he said.

Cyprus has been divided between the Turkish north and Greek Cypriot south since 1974.

In the run-up to the Commission’s recommendation on expansion of the eurozone, the question of Cyprus’s adoption of the euro has become highly politicised.

A report published by the European Central Bank (ECB) last week (16 May) warned that reunification of the island could affect the stability of the Greek Cypriot economy.

The ECB warned: "Possible reunification of Cyprus could entail structural and fiscal challenges."

Economists are concerned that reunification could push Greek Cypriot government spending above the levels permitted by eurozone membership, as the two sides of the island create unified institutions.

There are also fears that the need to develop infrastructure in the poorer northern half of the island would see government spending soar. Germany has long claimed that reunification in 1990 of western and eastern Germany was one of the reasons why it broke rules limiting its budget deficit to 3% of gross domestic product.

Responding to the ECB’s warning, Talat said that the Greek Cypriot government might "use this as a pretext for promoting the status quo".

But Talat sought to allay fears that his government would unilaterally adopt the euro.

"We would like to join the eurozone, but when the rules, opportunities and obligations are totally implemented."

Under euro rules, countries wishing to join the single currency must first become members of the EU, or negotiate an agreement with the EU. Monaco, San Marino, the Vatican and Andorra have all entered into such agreements.

Talat said that northern Cyprus could do the same, "but the [Greek Cypriots] will not make agreements with us. They think that such an agreement, by implication or in reality, means recognition of the Turkish Republic of Northern Cyprus and they don’t want to see that".

He said that his government’s focus was on restarting direct trade between northern Cyprus and the EU. The Greek Cypriot government has blocked EU attempts to restart trade since July 2004.

In January, Germany, which currently holds the EU presidency, convinced the 26 other member states to commit themselves to lifting quickly the trade embargo against northern Cyprus. But Germany has been unable to push through the necessary legislation.

Berlin had backed plans for member states to vote on the question by qualified majority, rather than unanimity. Council of Ministers’ lawyers have now advised that the proposal should be adopted by unanimity, but Talat insisted qualified majority voting was still the way to go.

"It can be adopted in line with the Commission’s proposal, not by unanimity, but by qualified majority," he said.

Mehmet Ali Talat, the president of Turkish northern Cyprus, has warned that Greek Cypriot membership of the eurozone could hinder reunification of the island. But in an interview, Talat ruled out unilaterally adopting the euro in response.