20 million Cypriot Euros for every 10 billion Euros for Greece

Upon the con­clu­sion of the Euro­pean Coun­cil on 26 March 2010, Cypri­ot Pres­i­dent Demetris Christofias hoped that the mech­a­nism approved by the EU will not need to come into force, but con­firmed that, if it did, then for every 10 bil­lion Euros for Greece, Cyprus would need to con­tribute 20 mil­lion Euros.11Demetris Christofias, Pres­i­dent: State­ments, Brus­sels, 26/03/2010 (as report­ed by the Cyprus News Agency). He declared that, giv­en the close ties with Greece, Cyprus’ will­ing­ness to con­tribute could not be ques­tioned despite its present­ly dif­fi­cult eco­nom­ic sit­u­a­tion. Pres­i­dent Christofias added his hope that the EU-pres­i­den­cy would estab­lish fis­cal dis­ci­pline that would pre­vent oth­er coun­tries from hav­ing to face what Greece went through. At that time, the over­whelm­ing major­i­ty of Cyprus’ politi­cians, in tan­dem with the gen­er­al pub­lic, were in favour of the cre­ation of a sol­i­dar­i­ty pol­i­cy on behalf of the EU mem­ber states towards Greece.22Press Reports of polit­i­cal par­ties‘ state­ments, March 2010 (as report­ed by all Cypri­ot Media).

When the Eurogroup Sum­mit in May 2010 in Brus­sels decid­ed to acti­vate the 110 bil­lion Euro bailout plan for Greece, its lead­ers also decid­ed to set up a Euro­pean sta­bil­i­ty mech­a­nism to safe­guard the integri­ty of the Euro­zone. The sum­mit was per­ceived by Cypri­ot aca­d­e­mics and polit­i­cal com­men­ta­tors as allow­ing the EU-16 to send a deci­sive mes­sage of deter­mi­na­tion to weath­er the storm but also issue some sub­stan­tial self-crit­i­cism regard­ing the dra­mat­ic inad­e­qua­cies of the last months.33Inter­views with Cypri­ot econ­o­mists and polit­i­cal econ­o­mists con­duct­ed by Chris­tos Xenophon­tos and Nico­le­ta Athanasi­adou, Nicosia, June 2010. Simul­ta­ne­ous­ly, the shared expec­ta­tion was that the cri­sis might also result in the elab­o­ra­tion of stricter sta­bil­i­ty pact cri­te­ria while strength­en­ing mon­i­tor­ing mechanisms.

As the Euro­pean Com­mis­sion released 14.5 bil­lion Euros in aid to Greece to sup­port the mech­a­nism for the country’s ail­ing econ­o­my, Cypri­ot politi­cians and econ­o­mists expressed their relief: as they explained, the con­se­quences of a pos­si­ble break­down of the Greek econ­o­my would direct­ly affect all the economies of the Euro­zone.44Press Reports of polit­i­cal par­ties’ state­ments, May 2010, as report­ed by all Cypri­ot Media, and TV pan­els with Cypri­ot econ­o­mists and polit­i­cal fig­ures. And yet, polit­i­cal ana­lysts point­ed out that this ail­ing eco­nom­ic sit­u­a­tion will have, in the long run, pos­i­tive effects on the EU inte­gra­tion process. In any event, they artic­u­lat­ed the need for the cre­ation of mech­a­nisms that will bet­ter mon­i­tor and coor­di­nate the nation­al fis­cal poli­cies of the Euro­zone mem­bers.55Inter­views con­duct­ed by Chris­tos Xenophon­tos and Nico­le­ta Athanasi­adou, Nicosia, June 2010.

Our inter­locu­tors and oth­ers empha­sised as obvi­ous that the Greek expe­ri­ence, as well as the expe­ri­ence of mem­bers such as Spain, Por­tu­gal and Ire­land, has taught us anew the man­i­fest inter­con­nect­ed­ness and inter­de­pen­dence of today’s nation­al economies. These facts apply not mere­ly to the Euro­zone mem­ber states, but to all EU economies. They also point­ed out that EU lead­ers recent­ly agreed to larg­er sur­veil­lance and coor­di­na­tion of nation­al bud­gets, with­out, how­ev­er, reach­ing a deal on any sanc­tions to be imposed on states in a weak finan­cial posi­tion, an issue to be revis­it­ed at the end of this year.

The notion of impos­ing sanc­tions was accom­pa­nied by some pre­cau­tions by Cypri­ot diplo­mats, who not­ed that any finan­cial penal­ties would aggra­vate the eco­nom­ic prob­lems of any mem­ber state.66Inter­views con­duct­ed by Chris­tos Xenophon­tos, Min­istry of For­eign Affairs, Nicosia, June 2010. Nev­er­the­less, they agree with aca­d­e­m­ic ana­lysts that these EU mech­a­nisms should achieve the com­pli­ance of the nation­al gov­ern­ments with their EU com­mit­ments by pro­vid­ing incen­tives as well as a series of esca­lat­ing sanc­tions. The lat­ter, which do not nec­es­sar­i­ly have to be finan­cial, might include the tem­po­rary pro­hi­bi­tion of vot­ing at the Eco­nom­ic Affairs Council.

Cen­tral Bank gov­er­nor, Athana­sios Orphanides, acknowl­edged that the finan­cial cri­sis had revealed some of the Cypri­ot economy’s struc­tur­al weak­ness­es.77Athana­sios Orphanides, Cen­tral Bank Gov­er­nor: Speech at the 12th con­fer­ence of Trade Union Organ­i­sa­tions and Staff Asso­ci­a­tions, Nicosia, 12/05/2010. Speak­ing at the 12th Con­fer­ence of Trade Union Organ­i­sa­tions and Staff Asso­ci­a­tions rep­re­sent­ing the Per­son­nel of the Euro­pean Nation­al Cen­tral Banks, Orphanides warned that infla­tion­ary pres­sures were high­er than in any oth­er Euro­zone coun­try, a fact impact­ing the economy’s com­pet­i­tive­ness. Not­ing that the salaries of civ­il ser­vants in Cyprus had increased by 5.7 per­cent in 2009 in com­par­i­son to 1.3 per­cent in oth­er Euro­zone states, the gov­er­nor empha­sised as basic goals the main­te­nance of steady employ­ment and the mon­e­tary system’s reform. Simul­ta­ne­ous­ly, Min­is­ter of Labour, Soter­oula Char­alam­bous, under­lined the need for bal­anced labour rela­tions and a con­struc­tive dia­logue of social actors through­out Europe, regard­ing this as essen­tial to strength­en­ing the sys­tem.88Soter­oula Char­alam­bous, Min­is­ter of Labour: Speech at the 12th con­fer­ence of Trade Union Organ­i­sa­tions and Staff Asso­ci­a­tions, Nicosia, 12/05/2010. The head of the Euro­pean Nation­al Cen­tral Bank Unions also not­ed that more effec­tive coor­di­na­tion and analy­sis of infor­ma­tion with improved social dia­logue was need­ed.99Head of the Euro­pean Nation­al Cen­tral Bank Unions: Speech at the 12th con­fer­ence of Trade Union Organ­i­sa­tions and Staff Asso­ci­a­tions, Nicosia, 12/05/2010.

On the Europe 2020 Strat­e­gy, Pres­i­dent Christofias declared that Cyprus was with­in the range of its capac­i­ty of achiev­ing the strate­gic tar­gets, assert­ing that the five areas of action – knowl­edge, inno­va­tion, sus­tain­able econ­o­my, high employ­ment and deal­ing with social exclu­sion and reduc­ing pover­ty – were “achiev­able” by the Repub­lic.1010State­ments by Pres­i­dent Demetris Christofias, Brus­sels, 26/03/2010 (as report­ed by the Cyprus News Agency). Cyprus, he added, wants to see a peo­ple-cen­tric Europe emerge from the imple­men­ta­tion of the Treaty.

Also com­ment­ing on the Europe 2020 Strat­e­gy, Mar­ios Vour­gos, Direc­tor of the Euro­pean Insti­tute of Cyprus, stat­ed that the cri­sis had neu­tralised the progress achieved in the EU over many years, cul­mi­nat­ing in a 4 per­cent slow­down in growth in 2009, a fig­ure not seen since the 1930s.1111Inter­view con­duct­ed by Chris­tos Xenophon­tos, Euro­pean Insti­tute of Cyprus, Nicosia, June 2010. On the cri­sis’ caus­es, Vour­gos said it was man­i­fest that a series of fun­da­men­tal issues that should have been dealt with – both glob­al­ly and by the EU – had not been prop­er­ly assessed and, although the indi­ca­tions were clear, these had been under­ap­pre­ci­at­ed. On Cyprus, Vour­gos said its unem­ploy­ment rate was around 6 per­cent, one of the low­est in the EU, when in some Baltic mem­ber states the fig­ure exceeds 20 per­cent. On what should be done, Vour­gos referred to three cat­e­gories of tar­gets: 1) growth based on knowl­edge and inno­va­tion; 2) growth based on social cohe­sion and high employ­ment with­out exclu­sions; and 3) green growth. Final­ly, Direc­tor Vour­gos not­ed opti­misti­cal­ly an impor­tant dif­fer­ence com­pared with the past, acknowl­edg­ing that the EU now has in place the nec­es­sary mech­a­nisms to mon­i­tor the imple­men­ta­tion of its goals.

Oth­er polit­i­cal ana­lysts referred to the DG Employ­ment and Social Affairs’ month­ly labour mon­i­tor report, which revealed that unem­ploy­ment in Cyprus still remained below the EU aver­age but could exceed 7 per­cent in 2011. Such a fig­ure would be a “his­toric high” for Cyprus. The cur­rent sit­u­a­tion, accord­ing to them, is the worst record­ed since 1974, fol­low­ing the Turk­ish inva­sion. How­ev­er, our inter­locu­tors expressed the belief that the new ten-year strat­e­gy, Europe 2020, pro­vides impor­tant guide­lines to the mem­ber states on how to pro­ceed in the com­ing years in order to over­come the dif­fi­cul­ties they face at present.1212Inter­views con­duct­ed by Nico­le­ta Athanasi­adou and Chris­tos Xenophon­tos, Nicosia, ear­ly June 2010.

    Footnotes

  • 1Demetris Christofias, Pres­i­dent: State­ments, Brus­sels, 26/03/2010 (as report­ed by the Cyprus News Agency).
  • 2Press Reports of polit­i­cal par­ties‘ state­ments, March 2010 (as report­ed by all Cypri­ot Media).
  • 3Inter­views with Cypri­ot econ­o­mists and polit­i­cal econ­o­mists con­duct­ed by Chris­tos Xenophon­tos and Nico­le­ta Athanasi­adou, Nicosia, June 2010.
  • 4Press Reports of polit­i­cal par­ties’ state­ments, May 2010, as report­ed by all Cypri­ot Media, and TV pan­els with Cypri­ot econ­o­mists and polit­i­cal figures.
  • 5Inter­views con­duct­ed by Chris­tos Xenophon­tos and Nico­le­ta Athanasi­adou, Nicosia, June 2010.
  • 6Inter­views con­duct­ed by Chris­tos Xenophon­tos, Min­istry of For­eign Affairs, Nicosia, June 2010.
  • 7Athana­sios Orphanides, Cen­tral Bank Gov­er­nor: Speech at the 12th con­fer­ence of Trade Union Organ­i­sa­tions and Staff Asso­ci­a­tions, Nicosia, 12/05/2010.
  • 8Soter­oula Char­alam­bous, Min­is­ter of Labour: Speech at the 12th con­fer­ence of Trade Union Organ­i­sa­tions and Staff Asso­ci­a­tions, Nicosia, 12/05/2010.
  • 9Head of the Euro­pean Nation­al Cen­tral Bank Unions: Speech at the 12th con­fer­ence of Trade Union Organ­i­sa­tions and Staff Asso­ci­a­tions, Nicosia, 12/05/2010.
  • 10State­ments by Pres­i­dent Demetris Christofias, Brus­sels, 26/03/2010 (as report­ed by the Cyprus News Agency).
  • 11Inter­view con­duct­ed by Chris­tos Xenophon­tos, Euro­pean Insti­tute of Cyprus, Nicosia, June 2010.
  • 12Inter­views con­duct­ed by Nico­le­ta Athanasi­adou and Chris­tos Xenophon­tos, Nicosia, ear­ly June 2010.

The reports focus on a report­ing peri­od from Decem­ber 2009 until May 2010. This sur­vey was con­duct­ed on the basis of a ques­tion­naire that has been elab­o­rat­ed in March and April 2010. Most of the 31 reports were deliv­ered in May 2010.

The EU-27 Watch No. 9 receives sig­nif­i­cant fund­ing from the Otto Wolff-Foun­da­tion, Cologne, in the frame­work of the ‘Dia­log Europa der Otto Wolff-Stiftung’, and finan­cial sup­port from the Euro­pean Com­mis­sion. The Euro­pean Com­mis­sion is not respon­si­ble for any use that may be made of the infor­ma­tion con­tained therein.