In response to the thorny question of who would fund a solution to the Cyprus problem, it has suggested that the international community could offer support if the two communities’ main creditors wrote off their debts.
That is to say, Turkey for the Turkish Cypriots and the Troika lenders – the European Support Mechanism (ESM) and the International Monetary Fund (IMF) for the Greek Cypriots (Alexander Apostolides – inCyprus).
Fiona Mullen in her article acknowledges that talk of debt write-off is unpalatable and suggests another possible solution.
She says that in April, according to the credit rating agency, Fitch Ratings, the 10 billion euro bail out for the Greek Cypriots contains a “buffer” of about 3 billion euro. That money, Mullen says could be used to fund initial costs of a settlement.
This could pay for the rehousing of those displaced by territorial adjustment, and infrastructure such a modern telecoms for Varosha, or modernising Famagusta port.
The advantage of using the “bailout buffer” money is that it has already been through the arduous political process of approval. It would be much easier to get votes to redirect the funds, rather than trying to get more monies from a bailout-wearied EU, she believes.
In conclusion Mullen says:
“There could also be guarantees from triple-A rated banks like the European Investment Bank (EIB) or the European Bank of Reconstruction and Development (EBRD). Or they could take stakes in major projects. This attracts other major investors by reducing risk perceptions.
In 2004, Cyprus received pledges of only $400m from the US and €259m from the EU and history suggests that only a tiny percentage of donor pledges are ever met.”
Fiona Mullen – inCyprus
