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Cyprus takes over EU presidency

A small island with big problems takes over the rotating presidency of the EU Council from July 1, 2012. But Cyprus is a unique case in more ways than one.

The eurozone crisis has cast a shadow over the rotating EU Council presidency. Cyprus will be the first country dependent on eurozone bailout funds to hold the presidency. The Cypriot government applied for the bailout just a few days before the start of their term in office. As in Spain, Cyprus' banks are beset with problems - but for different reasons.

Janis Emmanouilidis, an expert on Greece and Cyprus at the European Policy Center think-tank in Brussels, notes that there are "considerable interdependencies between Greece and Cyprus, above all in the banking sector. And Cypriot banks have had to endure major losses as a result of the restructuring of Greek debt." Details of the amount of aid Cyprus will receive and the conditions attached have not yet been agreed.

Money from Moscow


Cyprus President Dimitris Christofias studied in Moscow

A few months ago, Cyprus was in receipt of aid from another source. In December 2011, Russia granted Cyprus a credit of 25 billion euros ($32 billion). The EU does not approve of aid from third parties because it fears a member country becoming financially dependent on a third party. But the Cypriot Member of the European Parliament Ioannis Kasoulides doesn't see the danger. He's a Christian Democrat who lost to the Communist Dimitris Christofias in the presidential election. However, he says now, "Despite the fact that I am in opposition to President Christofias and I often criticize his policies, I don't believe that this loan was given in exchange for any political returns."

But why aid from Russia? Janis Emmanouilidis explained it with "centuries-old historical and cultural relationships" and the shared Orthodox Christian tradition. But above all, economic interests are at play. "There are Russian investors who have invested in Cyprus and who have put their money in the Cypriot banking sector," he says. "Because of that there are concrete reasons why Moscow has given aid to Cyprus."

Negotiations with Turkey on ice

Deserted hotels in an area used by the Turkish military are seen through a wire fence in the Turkish-occupied coastal town of Famagusta

Hotels stand empty in Famagusta in the Turkish part of the island

But Cyprus won't just be the first country in receipt of eurozone bailout funds - and the first with a Communist president - to be handed the EU Council presidency. It is also the only divided EU country. In law, the entire country of Cyprus entered the European Union in 2004. In reality, only the Greek-speaking southern part of Cyprus joined. The north of the country has been occupied by Turkish troops since 1974. It calls itself the Turkish Republic of Northern Cyprus, but is only recognized as a state by Turkey, which does not recognize the Republic of Cyprus. Turkey has banned Cypriot nationals from entering their country and has rejected a tax union with Cyprus.

The political conflict will have a direct impact on the presidency. The government in Ankara, still in engaged in negotiations over Turkey's entry into the EU, intends to boycott all meetings dealing with Turkey with Cyprus-led councils of ministers. For Martin Schulz, the President of the European Parliament, that situation is intolerable: "It can't be the case that a country that wants to be an EU member state says, 'We don't recognize a country which is already a member of the European Union, and if this country holds the presidency, then we're suspending all of our activities.'"

EU will continue to back Cyprus

Cyprus has applied for aid from the EU bailout fund

Cyprus has applied for aid from the EU bailout fund

But the EU can't force Turkey on the issue. Kasoulides is unperturbed: "Turkey has chosen not to recognize the Cypriot presidency for the next six months. It's their choice. I think it's to their detriment, but it's their choice."

But President Christofias believes there is a danger that the situation could block the EU Council presidency. During a recent trip to Brussels, he promised, "We're prepared to continue the dialogue concerning a solution to Cypriot problem during the presidency, but only on the condition that the other side is also willing." And should diplomatic developments take a turn for the worse? Schulz is right behind Christofias: "If Turkey engages in other activities or measures, which I can't identify at present, the EU will definitely support Cyprus." But he also warned, "not to go over the top. It's in our own interests to maintain cordial relations with Turkey."

Long-term aim of reunification

A Turkish guardpost seen on a destroyed building in front of a breakaway Turkish Cypriot state flag

Turkish military forces are based near to Nikosia

In Brussels, President Christofias also once again strongly reiterated the ultimate aim of any dialogue with the Turkey as "the reunification of our land and our people." The last serious attempt to achieve that was the Annan Plan in 2004. That failed because the majority of Greek-speaking Cypriots rejected it. Kasoulides was a supporter, but now, he says, "I am deeply disappointed. I don't see under these circumstances that a settlement is in sight."

The reason why so many of his fellow citizens rejected the plan was the fear that Turkey would not abide by the terms of the agreement. As Kasoulides said, "If we're going to change the status quo, we're going to do it because Turkey will accept that the problem is solved; then it will withdraw its army from Cyprus and allow Cyprus to function as an independent, sovereign country." But that's for the future. During the Cypriot EU Council presidency, internal dialogue in the country will continue to simmer and the awkward silence between Cyprus and Turkey will continue.

Author: Christoph Hasselbach, Brussels / hw
Editor: Michael Lawton

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