European Council’s decision will help to overcome the institutional crisis

The Irish rejec­tion of the Lis­bon Treaty was per­ceived by the vast major­i­ty of Cypri­ots as a seri­ous set­back in the efforts for a stronger and more demo­c­ra­t­ic Euro­pean Union. The con­clu­sions of the Euro­pean Coun­cil of Decem­ber 2008 regard­ing the fate of the Lis­bon Treaty, even though it was not wide­ly cov­ered by the Cypri­ot mass media, was per­ceived by many of our inter­locu­tors as a step for­ward towards a more coher­ent and effi­cient Euro­pean Union.[1]

Com­ment­ing on the con­clu­sions of the Euro­pean Coun­cil, Cypri­ot Pres­i­dent, Demetris Christofias, expressed his over­all sat­is­fac­tion, adding that the deci­sions tak­en by the EU lead­ers dur­ing the Euro­pean Coun­cil of Decem­ber 2008 will help the EU to over­come the insti­tu­tion­al cri­sis caused by the Irish rejec­tion of the Lis­bon Treaty.[2]

More­over, diplo­mats con­veyed to us their intu­ition that the agree­ment reached dur­ing the Decem­ber 2008 EU Sum­mit, regard­ing the Euro­pean Commission’s con­sti­tu­tion of one Com­mis­sion­er from each mem­ber state, will be ben­e­fi­cial to small mem­bers such as Cyprus.[3] On the oth­er hand, the diplo­mats point­ed out that, as the Treaty of Lis­bon needs to be rat­i­fied by all mem­ber states in order to obtain legal force, and since this did not hap­pen as sched­uled by the end of 2008, the treaty will come into force on the first day of the month fol­low­ing the last rat­i­fi­ca­tion. Our inter­locu­tors, how­ev­er, did not pre­clude the pos­si­bil­i­ty that per­haps new obsta­cles might be raised by oth­er mem­ber states that have not yet rat­i­fied the treaty.

It must be not­ed that the Cypri­ot House of Rep­re­sen­ta­tives had rat­i­fied the Treaty of Lis­bon on 3 July 2008. At a day-long ses­sion, 31 votes were cast in favour, 17 against, while one MP abstained.[4] Cyprus was the twen­ti­eth EU mem­ber state to rat­i­fy the treaty. Main oppo­si­tion par­ty, Demo­c­ra­t­ic Ral­ly (DISY), coali­tion par­ties Demo­c­ra­t­ic Par­ty (DIKO) and Social­ist EDEK, and oppo­si­tion Euro­pean Par­ty EVROKO, vot­ed in favour of the treaty. The only par­ty opposed was the rul­ing Com­mu­nist par­ty AKEL, whose leader, Pres­i­dent Christofias, lat­er stat­ed that, as elect­ed Pres­i­dent of the Repub­lic, he had to hon­our the sig­na­ture of his pre­de­ces­sor and sup­port the treaty.[5] The Cyprus Green Par­ty abstained, not, as it said, because it was against fur­ther Euro­pean inte­gra­tion, but because of the non-demo­c­ra­t­ic way the treaty was being promoted.

The par­ties which vot­ed in favour of the Lis­bon Treaty, in speech­es deliv­ered by their MPs and par­ty lead­ers, stressed that the treaty, despite its weak­ness­es, is the way for the EU to move for­ward and uni­fy Europe, strength­en the role of Cyprus with­in the EU, strength­en the pow­ers of the Euro­pean Par­lia­ment and nation­al par­lia­ments, and help the EU gain a strong voice on the inter­na­tion­al scene.[6] They crit­i­cised the stance held by rul­ing Com­mu­nist par­ty AKEL and said that the treaty will strength­en insti­tu­tions which con­tribute to the secu­ri­ty of Cyprus and will pro­vide Cyprus with added instru­ments in its efforts for a polit­i­cal settlement.

Oppo­si­tion DISY leader Nicos Anas­tasi­ades also said that the rat­i­fi­ca­tion of the treaty sends a pos­i­tive mes­sage to the rest of Europe. AKEL MPs, in jus­ti­fy­ing their oppo­si­tion, said that the treaty rep­re­sents a neo-lib­er­al approach, that Euro­pean cit­i­zens have not been prop­er­ly informed on the pro­vi­sions of the treaty, that it weak­ens small­er EU mem­ber states like Cyprus, that mar­kets will be com­plete­ly dereg­u­lat­ed there­fore hurt­ing con­sumers, and that the NATO alliance remains the main Euro­pean defence struc­ture. The leader of AKEL’s par­ty group in the par­lia­ment, in respond­ing to crit­i­cism by the oth­er par­ties on its posi­tion on the Lis­bon Treaty, not­ed that, since Pres­i­dent Christofias was elect­ed to office, sup­port for the EU amongst the Cypri­ots of the free part of the Repub­lic had risen by 20 per­cent. The leader of the Green Par­ty in his speech clar­i­fied that his par­ty is cer­tain­ly not opposed to the EU “mov­ing for­ward”; how­ev­er, he called both for a bet­ter treaty and for the treaty to be sub­mit­ted to a ref­er­en­dum in all EU mem­ber states. Most MPs main­tained that Cypri­ots were unaware of the pro­vi­sions of the Lis­bon Treaty and that more aware­ness-rais­ing was necessary.

The polit­i­cal par­ties’ debate on the Treaty of Lis­bon and each party’s argu­ments were per­ceived by polit­i­cal ana­lysts as a reli­able indi­ca­tion of the ori­en­ta­tions each par­ty will devel­op dur­ing the forth­com­ing Euro­pean Par­lia­ment elec­tions of June 2009. Thus, it had been assumed that, dur­ing the forth­com­ing cam­paign, the rul­ing AKEL par­ty would fol­low a more Cypro-cen­tric agen­da, while the main oppo­si­tion par­ty DISY, but also gov­ern­ment coali­tion par­ties DIKO and EDEK, would fol­low a more Euro-cen­tric approach but cou­pled with strong ele­ments relat­ed to the Cypri­ot Republic’s “exis­ten­tial” polit­i­cal problem.

Most of these assump­tions were large­ly ver­i­fied dur­ing the first pub­lic debate on the 2009 Euro­pean Par­lia­ment elec­tions, held in the stu­dios of the “Cyprus Broad­cast­ing Cor­po­ra­tion” on 9 Feb­ru­ary 2009. Rep­re­sen­ta­tives of most Cypri­ot polit­i­cal par­ties voiced opti­mism about greater vot­er par­tic­i­pa­tion this time.[7] Simul­ta­ne­ous­ly, they com­mit­ted them­selves to com­mu­ni­cate more effec­tive­ly to the pub­lic the impor­tance of their vote for the day-to-day issues that con­cern all Cypri­ots. This, then, was a telling depar­ture from the 2004 elec­tion when the Cyprus prob­lem was near­ly the sole issue that pre­oc­cu­pied the vot­ers and near­ly all polit­i­cal par­ties. In the debate on 9 Feb­ru­ary 2009, there was wide­spread agree­ment that, togeth­er with the Republic’s nation­al, exis­ten­tial prob­lem, the most cru­cial and urgent issues faced by the Cypri­ot pub­lic are those of the glob­al eco­nom­ic cri­sis, ille­gal immi­gra­tion, crime, and ener­gy. An even more activist per­for­mance in the future by the Cypri­ot MEPs on a broad Euro­pean Par­lia­ment agen­da was also con­sid­ered most appro­pri­ate, since it could also serve to increase the EU’s involve­ment in and fur­ther con­cern about the Repub­lic of Cyprus’ prob­lem of par­tial occu­pa­tion by a can­di­date state.

Con­cern­ing the appoint­ment of the High Rep­re­sen­ta­tive for the Com­mon For­eign and Secu­ri­ty Pol­i­cy, our inter­locu­tors in the Min­istry of For­eign Affairs believe that this is cer­tain­ly a move towards bet­ter coor­di­na­tion among the EU-27 and fur­ther inte­gra­tion espe­cial­ly in the sec­tor of the Com­mon For­eign and Secu­ri­ty Policy.[8] On the oth­er hand, some Cypri­ot polit­i­cal ana­lysts argue that the posi­tion of the High Rep­re­sen­ta­tive, cur­rent­ly held by for­mer NATO Sec­re­tary Gen­er­al Javier Solana, rais­es some con­cerns whether this is a step towards fur­ther ‘Euro­pean inte­gra­tion’ or a step which enforces the Euro-Atlantic core of the EU. Nev­er­the­less, it is also hoped that Barack Obama’s elec­tion to the US Pres­i­den­cy may well align the two diverse ten­den­cies in the future.

2. Transatlantic relations renewed after President Bush: top priorities


Cyprus hopes on Obama’s active support for reunification

The Cypri­ot peo­ple were quite enthu­si­as­tic about Barack Obama’s elec­tion. Among oth­er things, this was because dur­ing his cam­paign he promised to the Greek-Amer­i­can com­mu­ni­ty that if elect­ed, he will seek to nego­ti­ate a polit­i­cal set­tle­ment on Cyprus. As Pres­i­dent Oba­ma put it, “there must be a just and mutu­al­ly agreed set­tle­ment of dif­fi­cult issues like prop­er­ty, refugees, land and secu­ri­ty”. Most impor­tant­ly, he added that “a nego­ti­at­ed polit­i­cal set­tle­ment on Cyprus would end the Turk­ish occu­pa­tion of north­ern Cyprus and repair the island’s trag­ic divi­sion while paving the way to pros­per­i­ty and peace through­out the entire region”[9].

The Cypri­ot gov­ern­ment con­grat­u­lat­ed Barack Oba­ma on his elec­tion, while express­ing hope that his admin­is­tra­tion will active­ly sup­port the island-state’s reuni­fi­ca­tion process. Cypri­ot Pres­i­dent, Demetris Christofias, spoke of the “very pos­i­tive posi­tions” of Joe Biden and the long stand­ing rela­tion­ship with him.[10] He made ref­er­ence to Turk­ish Prime Min­is­ter Recep Tayyip Erdoğan’s report­ed remark that he hoped that Obama’s state­ments (on Cyprus) would remain mere pre-elec­tion dec­la­ra­tions. Pres­i­dent Christofias said he hoped that the exact oppo­site would be the case. But he also made clear that Cyprus does not demand any­thing: all it wants is a fair treatment.

Cypri­ot gov­ern­ment spokesman, Ste­fanos Ste­fanou, had stat­ed some months ago that “Pres­i­dent Oba­ma has made spe­cif­ic dec­la­ra­tions which we wel­come. We hope that these dec­la­ra­tions will be fulfilled”[11]. In the eyes of most Greek Cypri­ots, the US admin­is­tra­tion – espe­cial­ly the one under George W. Bush – have been, to date, far more pro-Turk­ish, in view of Turkey’s region­al strate­gic impor­tance. But as Ste­fanou put it, “We ask noth­ing more than respect for the val­ues of inter­na­tion­al law and UN res­o­lu­tions on Cyprus. We will insist on this, bear­ing in mind the real­i­ties exist­ing both in the US itself and in the world.” The gov­ern­ment spokesman also empha­sised that the Cypri­ot gov­ern­ment notes that Obama’s pro­gramme and his dec­la­ra­tions promise a new era for the USA, which will bring more social jus­tice in the coun­try and a nor­mal­i­sa­tion of its rela­tions with the rest of the world.

In gen­er­al, the Cypri­ot mass media pre­sent­ed the elec­tion of Barack Oba­ma as a his­toric oppor­tu­ni­ty for the EU to re-define its rela­tions with the US.[12] Accord­ing to the Cypri­ot media on var­i­ous occa­sions, EU offi­cials have expressed strong sat­is­fac­tion over Obama’s elec­tion and spoke of the need for a renewed com­mit­ment between Europe and the Unit­ed States to a new joint direc­tion in the world. Cypri­ot media were eager to report that numer­ous EU lead­ers also spoke of a remark­able vic­to­ry allow­ing strong opti­mism about the chance for the Euro­pean Union and the Unit­ed States to pur­sue cru­cial solu­tions together.

On Obama’s elec­tion, Cypri­ot diplo­mats not­ed that this will pro­vide a “unique oppor­tu­ni­ty” to strength­en EU-US relations.[13] Accord­ing to the same diplo­mats, the three top pri­or­i­ties for a re-def­i­n­i­tion or re-vital­i­sa­tion of the transat­lantic and EU-US rela­tion­ship are:

  1. The devel­op­ment of new and more flex­i­ble poli­cies towards third coun­tries such as Rus­sia and coun­tries in the Mid­dle East (espe­cial­ly for issues like the Israeli-Pales­tin­ian con­flict and the Iran­ian nuclear ambitions);
  2. The cre­ation of com­mon short-term and long-term poli­cies con­cern­ing cli­mate and ener­gy issues, by pro­mot­ing new tech­nolo­gies and incen­tives in the cap­i­tal mar­kets in order to push for­ward more quick­ly the devel­op­ment of a green economy;
  3. Com­mon approach­es on the glob­al finan­cial cri­sis in order to avoid a longer and more painful recession.

More­over, in the words of one of our inter­locu­tors at the Cypri­ot Min­istry of For­eign Affairs, “the era that we are liv­ing in demands a clos­er coop­er­a­tion between the EU and the US, and also among them and Rus­sia as well as such emerg­ing major pow­ers as Chi­na and India. This is because the present-day prob­lems are com­mon all over the world and thus the inter­na­tion­al com­mu­ni­ty needs com­mon actions in order to be able to over­come these chal­lenges. The EU can bring all these coun­tries togeth­er and estab­lish an ongo­ing con­struc­tive coop­er­a­tion among them, because it has proven to be a reli­able and fair medi­a­tor and hon­est bro­ker with all states”[14].

To be sure, there were also some (lone­ly) scep­ti­cal voic­es in a few radio and tele­vi­sion inter­views with Cypri­ot ana­lysts who, by recall­ing repeat­ed dis­ap­point­ing cas­es of mis­placed Cypri­ot expec­ta­tions, argued that the Oba­ma elec­tion would not be dif­fer­ent than any oth­er since, as the cliché goes, ‘US Pres­i­dents are not the ones who real­ly decide’. The most seri­ous com­men­ta­tors, how­ev­er, such as for­mer Cypri­ot Min­is­ter for For­eign Affairs, Era­to Koza­k­ou-Mar­coullis, the rec­tor of the Uni­ver­si­ty of Cyprus, Stavros Zenios, and rec­tor of the Uni­ver­si­ty of Nicosia, Michalis Attal­ides, wel­comed unre­served­ly the start of the Barack Oba­ma admin­is­tra­tion. Dur­ing a long live pro­gramme at the “Cyprus Broad­cast­ing Cor­po­ra­tion” (“CyBC”) before and dur­ing the 20 Jan­u­ary 2009 cer­e­mo­ny in Wash­ing­ton, the three Cypri­ot per­son­al­i­ties expressed deep appre­ci­a­tion for both the capa­bil­i­ties and the vision of the new­ly elect­ed US Pres­i­dent. Thus, Attal­ides stressed his con­vic­tion that the inter­na­tion­al com­mu­ni­ty will expe­ri­ence bet­ter days with Oba­ma at the US helm, while Zenios added that not only Obama’s vision is most promis­ing but he has proven already that, in its exe­cu­tion, he can be prag­mat­ic indeed. Koza­k­ou-Mar­coullis con­curred on the label “prag­mat­ic” and, in con­trast to the pes­simists, con­clud­ed that the Oba­ma admin­is­tra­tion can be relied upon to make, inter alia, a salu­tary con­tri­bu­tion to the res­o­lu­tion of the Cyprus prob­lem, pro­vid­ed that the Cypri­ots also assert their rights active­ly and appropriately.

The next day, the chair­man of the “Cyprus Insti­tute of Mediter­ranean, Euro­pean and Inter­na­tion­al Stud­ies” (KIMEDE), Costas Melakopi­des, inter­viewed by the “CyBC”, endorsed ful­ly the eval­u­a­tion by the three afore­men­tioned commentators.[15] In addi­tion, he empha­sised the series of “ide­al­ist” val­ues that Pres­i­dent Oba­ma had embraced in his speech, such as human rights, fair­ness and jus­tice, dia­logue even with for­mer ene­mies, and refusal to regard mil­i­tary pow­er as either always nec­es­sary or suf­fi­cient to achieve Amer­i­can goals. In this way, the new pres­i­dent sig­nalled his com­mit­ment to a far less antag­o­nis­tic and bel­li­cose, but far more coop­er­a­tive and mul­ti­lat­er­al­ist, US pos­ture in the world. Melakopi­des thus con­clud­ed by sub­mit­ting, as a more accu­rate descrip­tion of the new Amer­i­can President’s world­view, the con­cept of “prag­mat­ic idealist”.

Final­ly, Greek-speak­ing media in Cyprus (as in Greece), did not even attempt to hide their ‘relief’ at the depar­ture of George W. Bush and Obama’s arrival on the inter­na­tion­al stage. After all, beyond the sin­cere expec­ta­tion that the new admin­is­tra­tion will hon­our its pro­nounce­ments on Cyprus and Greek-Turk­ish rela­tions, jour­nal­ists and ana­lysts could not miss Obama’s and Hillary Clinton’s, US Sec­re­tary of State, repeat­ed ref­er­ences to (Pro­fes­sor Joseph Nye’s) ‘soft pow­er’ and ‘smart pow­er’ notions as their own favoured instru­ments for the per­for­mance of the Unit­ed States in the world.

3. Financial crisis and challenges of global governance: the EU response


Economic crisis hits Cypriot tourism and construction industry

Cyprus felt the impact of the glob­al finan­cial cri­sis, how­ev­er, at a low­er scale than oth­er EU mem­ber state economies. In Octo­ber, the inter­na­tion­al cred­it cri­sis esca­lat­ed sig­nif­i­cant­ly and the “Cyprus Stock Exchange” suf­fered its heav­i­est loss­es since 1999. At the time, Cypri­ot Pres­i­dent, Demetris Christofias, in his inter­ven­tion at the sev­enth EU-Asia Sum­mit (ASEM) in Bei­jing, not­ed that the inter­na­tion­al finan­cial cri­sis required fast and coor­di­nat­ed actions by all states.[16] Upon his return to Cyprus, Christofias stat­ed that the Cypri­ot econ­o­my is not sub­stan­tial­ly affect­ed by the cri­sis, while the country’s bank­ing sys­tem still stands strong.[17] Min­is­ter of Finance, Char­i­laos Stavrakis, shar­ing the president’s view, also observed that the Cypri­ot econ­o­my will inevitably be affect­ed by the inter­na­tion­al finan­cial cri­sis, but because of its robust foun­da­tions it will be able to come out of the cri­sis much eas­i­er than oth­er states.[18]

While efforts were made at EU and Euro­zone lev­el to come up with mea­sures to address the cri­sis, the Euro­pean Commission’s eco­nom­ic fore­casts for Cyprus showed growth for the island’s econ­o­my (2.9 per­cent) at 29 times the Euro­zone aver­age despite the over­all slowdown.[19] Min­is­ter of Finance Stavrakis, speak­ing from Brus­sels, expressed sat­is­fac­tion with the fore­casts, while adding that these are not rea­son for calm.[20] He also stat­ed that this is the best indi­ca­tor that the government’s eco­nom­ic plan­ning is in the right direc­tion and that it appears that the gov­ern­ment will be able to ful­fil its plans. He also expressed the belief that if oil prices remain at cur­rent lev­els, infla­tion in Cyprus could slow down to 2.5 percent.

To over­come the impact of the finan­cial cri­sis, the Cypri­ot gov­ern­ment fol­lowed the guide­lines draft­ed at an EU lev­el dur­ing the high-lev­el dis­cus­sions between the Euro­pean Com­mis­sion, the Euro­pean Cen­tral Bank and large­ly affect­ed states, such as the Unit­ed King­dom, Ger­many and France. The Min­istries of Finance and of Com­merce, the “Cen­tral Bank of Cyprus” and oth­er finan­cial bod­ies, often briefed the Com­mit­tee on Euro­pean Affairs of the “House of Rep­re­sen­ta­tives” on the delib­er­a­tions on the Euro­pean lev­el regard­ing the effort to con­tain the finan­cial cri­sis. The “House of Rep­re­sen­ta­tives” need­ed to revise exist­ing leg­is­la­tion, accord­ing to revised EU direc­tives, in order to rein­force the sta­bil­i­ty of the finan­cial sys­tem, the reduc­tion of expo­sure of cred­it insti­tu­tions to risk, and the improve­ment of the over­sight of banks which oper­ate in more than one EU mem­ber state. As the pres­i­dent of the Com­mit­tee on Euro­pean Affairs of the “House of Rep­re­sen­ta­tives”, Nicos Clean­t­hous, stat­ed, this is a par­tic­u­lar­ly seri­ous issue giv­en the inter­na­tion­al finan­cial cri­sis, and there­fore the brief­ing of the “House of Rep­re­sen­ta­tives” will con­tin­ue in order for it to be bet­ter informed and there­fore capa­ble to fur­ther refine the leg­is­la­tion which will be derived from the EU directives.[21]

All rel­e­vant author­i­ties in Cyprus were also called to pre­pare emer­gency plans in order to sup­port sec­tors that might be affect­ed by the cri­sis, includ­ing the tourism indus­try and the hol­i­day home mar­ket. Thus, accord­ing to data released by the “Cyprus Hotel Own­ers’ Asso­ci­a­tion” and the “Cyprus Τourism Organ­i­sa­tion” the arrival of tourists from the UK and Rus­sia is expect­ed to decrease for 2009 and the income of the tourist indus­try for Sep­tem­ber 2008 was expect­ed to face a decrease of 6 percent.[22]

The Min­istry of Com­merce, Indus­try and Tourism exam­ined a series of mea­sures, such as the pro­mo­tion of Cyprus’ tourist prod­uct, con­cen­tra­tion on new mar­kets, and the cre­ation of a coor­di­nat­ing com­mit­tee which will han­dle a pos­si­ble crisis.[23] The Cyprus tourism organ­i­sa­tion out­lined a plan for win­ter tourism and also announced a pro­gramme for the attrac­tion of domes­tic tourists.[24] By ear­ly Feb­ru­ary 2009, how­ev­er, some signs were some­what melan­choly: over­all fig­ures about tourist arrivals in Jan­u­ary were down by 8.5 per­cent com­pared to the same month in 2008. On the oth­er hand, arrivals from the promis­ing mar­ket of Rus­sia in the same month had increased by 42.9 per­cent as com­pared to Jan­u­ary 2008.[25]

In this con­nec­tion, our com­mu­ni­ca­tion with the con­sulate gen­er­al of Cyprus in St. Peters­burg pro­vid­ed the fol­low­ing use­ful data. First, the visas issued by that con­sulate to Russ­ian tourists trav­el­ling to Cyprus in 2007 were 23,698, reach­ing 30,911 in 2008. And sec­ond, the total num­ber of Russ­ian tourists trav­el­ling to Cyprus for the years 2006 to 2008 were as fol­lows: (1) 2006: 114,758 peo­ple; (2) 2007: 145,914 peo­ple (i.e. an increase of 27.1 per­cent over the pre­vi­ous year); and (3) 2008: 180,919 peo­ple (or an increase of 24 per­cent over 2007).[26]

For its part, the Min­istry of Labour announced that, while Cyprus does not have a prob­lem with unem­ploy­ment, the gov­ern­ment will take mea­sures in case the finan­cial cri­sis does affect the con­struc­tion and tourism industries.[27] Part of these mea­sures is the cre­ation of a per­ma­nent mech­a­nism for obser­va­tion of the labour mar­ket, which will con­vene on a reg­u­lar basis.

The Inte­ri­or Min­istry also announced its plans for 2009, which aimed at boost­ing the con­struc­tion indus­try, which is the first sec­tor to be affect­ed by the cri­sis, as devel­op­ers warned of lay­offs and called for a reduc­tion of trans­fer fees and cap­i­tal gains tax.[28] The ministry’s plans include the ren­o­va­tion of old apart­ment build­ings and their resale to those enti­tled to sub­sidised hous­ing. Also, the increase in hous­ing aid to refugees of up to 100 per­cent, which will be effec­tive retroac­tive­ly as of 1 March 2008, and the grant of gov­ern­ment aid to the con­struc­tion sec­tor, based on income cri­te­ria and for those pur­chas­ing their first res­i­dence, in com­pen­sa­tion for the pay­ment of trans­fer fees.

Two aid pack­ages were also announced by the gov­ern­ment. The one, announced in Novem­ber 2008, pro­vid­ed for a 52 mil­lion Euro aid pack­age in sup­port of the tourist and con­struc­tion industries.[29] Accord­ing to the pack­age, devel­op­ment projects will be accel­er­at­ed and bureau­crat­ic pro­ce­dures will be sim­pli­fied in an effort to sup­port the con­struc­tion indus­try. Also, the appli­ca­tion for visa by third-coun­try cit­i­zens will be sim­pli­fied, a num­ber of con­sulates will be opened in coun­tries with a high poten­tial for tourism, and the Cyprus tourism organ­i­sa­tion bud­get will be sup­ple­ment­ed by 12 mil­lion Euro. The gov­ern­ment also decid­ed to form two action groups to deal with poten­tial prob­lems in the two sec­tors in danger.

Despite Pres­i­dent Christofias’ reas­sur­ances that the Cyprus econ­o­my is not only in good shape but also resilient, and that the gov­ern­ment makes sure that this remains so through a dynam­ic devel­op­ment pro­gramme, the main oppo­si­tion par­ty, Demo­c­ra­t­ic Ral­ly DISY, expressed its dis­sat­is­fac­tion with the first pack­age of mea­sures announced, while say­ing it expect­ed a rad­i­cal revi­sion of the bud­get and the sup­port of the pri­vate sec­tor, which did not happen.[30]

A sec­ond aid pack­age fol­lowed in ear­ly Feb­ru­ary 2009, when the gov­ern­ment announced the approval of an addi­tion­al 300 mil­lion Euro for the economy.[31] The pack­age of mea­sures, which aims to main­tain high pro­duc­tiv­i­ty lev­els and low unem­ploy­ment in light of the glob­al finan­cial cri­sis, con­cerns the con­struc­tion, tourism and finan­cial sec­tors. Pres­i­dent Christofias out­lined the mea­sures, which he described as sat­is­fac­to­ry for the time being, not­ing that these are tem­po­rary in nature, and stressed that there will be no new tax­es imposed by the government.[32] With regards to the tourism indus­try, air­port fees will be reduced for 2009 after the gov­ern­ment waives its share, VAT for the tourism indus­try for 2009 is reduced from 8 per­cent to 5 per­cent, fees payable to local author­i­ties per stay in hotels are waived, and mea­sures are tak­en to pro­mote domes­tic tourism and sub­sidise domes­tic tourism for low income fam­i­lies. The total cost of these mea­sures is esti­mat­ed at 51 mil­lion Euros. With regards to the con­struc­tion sec­tor, the gov­ern­ment decid­ed to grant long term low inter­est loans (for at least 20 years) for low and mid-income cou­ples look­ing to pur­chase a house of up to 200 square meters. The loans will have a 0 per­cent inter­est rate for the first two years. It also decid­ed to con­struct new units for refugees and the repair of school build­ings. The total cost of the pack­age for the con­struc­tion sec­tor is esti­mat­ed at 200 mil­lion Euros. In view of the need to main­tain low unem­ploy­ment rates, expect­ed to reach 4.5 per­cent in 2009, the gov­ern­ment will focus on train­ing work­ers and the secur­ing of a suit­able job for those apply­ing to the unem­ploy­ment office, as well as run a cam­paign against ille­gal work­ers and revise allowances for non-EU mem­ber state employ­ees. In an effort to strength­en the finan­cial sec­tor, Christofias announced that the gov­ern­ment will extend its deposit of 700 mil­lion Euros in com­mer­cial banks for an addi­tion­al three and a half months in an effort not to affect the liq­uid­i­ty of the sec­tor. Con­clud­ing the analy­sis of the pack­age, Christofias also reit­er­at­ed that the gov­ern­ment will con­tin­ue its social pol­i­cy and that it will in no case stop sup­port­ing the tax­pay­er. The mea­sures were wel­comed by polit­i­cal par­ties and pro­fes­sion­als associations.

In all, the glob­al finan­cial cri­sis is an issue which cer­tain­ly con­cerns the Cypri­ot peo­ple. As shown in the autumn 2008 Euro­barom­e­ter, Cypri­ots claim to be large­ly affect­ed by the cri­sis and are con­cerned by the future of the Cypri­ot, and the EU economy.[33] 67 per­cent stat­ed that they can bare­ly pay their util­i­ty bills each month, while 78 per­cent said it is not sat­is­fied with the cost of liv­ing in Cyprus. In addi­tion, 88 per­cent expressed dis­sat­is­fac­tion by the increas­ing price of ener­gy and 93 per­cent by the increas­ing hous­ing prices.[34] In “Marfin-Lai­ki Bank’s” annu­al sur­vey, the “Cypro­barom­e­ter”, near­ly half of the peo­ple asked (48 per­cent) said that, as regards the econ­o­my, 2008 was a much worse year than 2007,[35] Then, on 11 Feb­ru­ary 2009, upon return­ing from the ECOFIN and Eurogroup meet­ings in Brus­sels, Finance Min­is­ter Stavrakis admit­ted that Cyprus will not avoid an eco­nom­ic slow­down in the sec­ond half of 2009. Talk­ing at an event enti­tled “Lead­er­ship in a Chal­leng­ing Envi­ron­ment”, he added that, in any case, the Cypri­ot gov­ern­ment will retain its present rates for com­pa­ny tax­a­tion, giv­en that they pro­vide Cyprus with a com­par­a­tive advan­tage in attract­ing for­eign investment.[36]

In the inter­na­tion­al pow­er con­stel­la­tion sys­tem, the past months’ finan­cial down­fall showed a rel­e­vant shift, as the Euro had proven its strength and cred­i­bil­i­ty com­pared to the US Dol­lar and the British Pound. Ana­lysts from the “Cen­tral Bank of Cyprus” have expressed the esti­ma­tion that Eurozone’s econ­o­my will be able to even­tu­al­ly come out of the finan­cial cri­sis much stronger than before (already, in many Mid­dle East­ern coun­tries the use of the US Dol­lar has been replaced with the Euro as it is con­sid­ered a more sta­ble currency).[37] In gen­er­al, the cri­sis could lead the world’s large economies to seek a more effec­tive and effi­cient finan­cial sys­tem, per­haps a ‘new Bret­ton Woods’ as lead­ers such as Nico­las Sarkozy have start­ed envi­sion­ing. Polit­i­cal ana­lysts also believe that when the finan­cial cri­sis comes to an end, the polit­i­cal sys­tem will be trans­formed to a mul­ti-polar glob­al sys­tem of numer­ous region­al pow­ers, thus the coop­er­a­tion between nations will be imperative.[38]



[1] Inter­views con­duct­ed by Chris­tos Xenophon­tos at the Cypri­ot Min­istry of For­eign Affairs, Nicosia, Jan­u­ary 2009.
[2] Demetris Christofias, Pres­i­dent: State­ments, Brus­sels, 12 Decem­ber 2008 (as report­ed by all Cypri­ot media).
[3] Inter­views con­duct­ed by Chris­tos Xenophon­tos at the Cypri­ot Min­istry of For­eign Affairs, Nicosia, Jan­u­ary 2009.
[4] Dis­cus­sion in the House of Rep­re­sen­ta­tives on the Lis­bon Treaty, 3 July 2008 (as report­ed by all Cypri­ot media and the Cyprus News Agency).
[5] Demetris Christofias, Pres­i­dent: State­ments, Brus­sels, 3/4 July 2008 (as report­ed by all Cypri­ot Media).
[6] Dis­cus­sion in the House of Rep­re­sen­ta­tives on the Lis­bon Treaty, 3 July 2008 (as report­ed by all Cypri­ot Media and the Cyprus News Agency).
[7] For an account of the 2004 Euro­pean Par­lia­ment elec­tion in Cyprus, see Costas Melakopi­des: ‘Cyprus’, in: Juli­et Lodge (ed.): The 2004 Elec­tions to the Euro­pean Par­lia­ment, Hound­mills, UK 2005, pp. 73–80.
[8] Inter­views con­duct­ed by Chris­tos Xenophon­tos at the Cypri­ot Min­istry of For­eign Affairs, Nicosia, Jan­u­ary 2009.
[9] As report­ed by the Greek-Amer­i­can week­ly news­pa­per Greek News, avail­able at: (last access: 25 Jan­u­ary 2009).
[10] Christofias, Pres­i­dent: State­ments, Brus­sels, 8 Novem­ber 2008 (as report­ed by all Cypri­ot Media).
[11] Ste­fanos Ste­fanou, spokesper­son of the gov­ern­ment: State­ment, 3 July 2008 (as report­ed by all Cypri­ot Media and the Cyprus News Agency).
[12] Press com­men­taries, Novem­ber 2008.
[13] Inter­views con­duct­ed by Chris­tos Xenophon­tos at the Cypri­ot Min­istry of For­eign Affairs, Nicosia, Decem­ber 2008.
[14] Ibid.
[15] Costas Melakopi­des in an inter­view with the jour­nal­ist Paris Potami­tis, in: CyBC1: ‘From Day to Day’, 21 Jan­u­ary 2009.
[16] Demetris Christofias, Pres­i­dent: ASEM address, Bei­jing, 24/25 Octo­ber 2008 (as report­ed by all Cypri­ot Media).
[17] Demetris Christofias, Pres­i­dent: State­ments, Lar­naca, 25 Octo­ber 2008 (as report­ed by all Cypri­ot Media).
[18] Char­i­laos Stavrakis, Min­is­ter of Finance: State­ments, Nicosia, 26 Octo­ber 2008 (as report­ed by all Cypri­ot Media).
[19] Coun­cil of the Euro­pean Union: 2901st Coun­cil meet­ing Eco­nom­ic and Finan­cial Affairs, press release, No. 15067/08 (Presse 311), Brus­sels, 4 Novem­ber 2008, avail­able at: (last access: 25 Jan­u­ary 2009).
[20] Char­i­laos Stavrakis, Min­is­ter of Finance: State­ments, Brus­sels, 4 Novem­ber 2008 (as report­ed by all Cypri­ot media).
[21] State­ments after mem­bers of the Com­mit­tee on Euro­pean Affairs of the House of Rep­re­sen­ta­tives after its ses­sion, 21 Octo­ber 2008 (as report­ed by the Cyprus News Agency).
[22] Cyprus Hotel Own­ers’ Asso­ci­a­tion Press con­fer­ence, 28 Octo­ber 2008 (as report­ed by all Cypri­ot media).
[23] See: Min­istry of Com­merce, Indus­try and Tourism, 4 Novem­ber 2008, avail­able at: (last access: 25 Jan­u­ary 2009).
[24] Cyprus Tourism Organ­i­sa­tion: Press con­fer­ence, 4 Novem­ber 2008 (as report­ed by all Cypri­ot Media).
[25] 2,793 Russ­ian tourists had arrived in Cyprus in Jan­u­ary 2009, as com­pared to 1,955 in the same month of 2008. See: Simeri­ni (news­pa­per), 12 Feb­ru­ary 2009.
[26] Cor­re­spon­dence with the con­sulate gen­er­al of Cyprus at St. Peters­burg, 16 Feb­ru­ary 2009.
[27] See: Min­istry of Labour and Social Insur­ance, 4 Novem­ber 2008, avail­able at: (last access: 25 Jan­u­ary 2009).
[28] See: Min­istry of Inte­ri­or, 1 Novem­ber 2008, avail­able at: (last access: 25 Jan­u­ary 2009).
[29] Demetris Christofias, Pres­i­dent: State­ments, Nicosia, 14 Novem­ber 2008.
[30] Demo­c­ra­t­ic Ral­ly: Announce­ment, 14 Novem­ber 2008 (as report­ed by the Cyprus News Agency).
[31] Demetris Christofias, Pres­i­dent: State­ments, Nicosia, 3 Feb­ru­ary 2008.
[32] Ibid.
[33] Stan­dard Euro­barom­e­ter 70, Autumn 2008, avail­able at: (last access: 25 Jan­u­ary 2009).
[34] Ibid.
[35] Eco­nom­ic Research and Plan­ning Depart­ment of Marfin Lai­ki Bank: Cypro­barom­e­ter-2007, 19 June 2008.
[36] Simeri­ni (news­pa­per), 12 Feb­ru­ary 2009.
[37] Inter­views con­duct­ed by Nico­le­ta Athanasi­adou at the Cen­tral Bank of Cyprus, Nicosia, Decem­ber 2008.
[38] Inter­views con­duct­ed by Chris­tos Xenophon­tos at the Cypri­ot Min­istry of For­eign Affairs, Nicosia, Decem­ber 2008.