If South Cyprus leaves the eurozone, tourism in the TRNC would be greatly impacted, says Fiona Mullen, Cyprus Analyst for the Economist Intelligence Unit. This is because tourists would be prevented from crossing the border from south to north Cyprus. One million visitors cross to the north every year.
Mullen, who was speaking at a conference on the future of Cyprus, which was organised by the ‘Economist’ magazine, is also the director of Sapienta Economics based in Nicosia, said it is very possible that South Cyprus might leave the eurozone because Europe basically, is punishing the state by making it solve the problem on its own, after they voted against the bailout plan that the Eurogroup initially brought to the table.
“The new government is trying to put together a very complicated financial package, and from what we see they are not getting the proper technical assistance from the European Union and the International Monetary Fund [IMF],” which she calls dangerous because if South Cyprus leaves the euro and starts using a new currency, that new currency will immediately drop in value as happened in Argentina, and it will result in the Greek Cypriot government imposing capital controls to prevent money leaving the country in order to survive.
“This means the green line will be shut down, and Northern Cyprus will lose one million tourists passing through the green line each year, which will a be big hit on the economy of Turkish Cypriots.”
She also argued that discovery of natural gas off South Cyprus shores, presents a major opportunity for both sides and the region.
“The country leaving the zone would bring serious implications to Turkey, Turkish Cypriots and to the region. Russia already tried to take advantage of the situation to establish a naval base in Limassol, which would not be liked by Turkey,” she said.
Mullen further asserted that Europe, mainly Germany, does not understand the critical challenges that would be faced. “The Greek Cypriots don’t trust the EU now, and with that situation, the country could accept help from anybody, but the question is at what price.”
Explaining that before the economic crisis, there was a very powerful confluence of interests in the region that resulted from Turkey’s dependency on energy imports, Israel’s needs to make friends in Middle East and the stability needed for the Turkish and Greek Cypriots, she stated, “If everyone cooperates, everyone makes more money, and we have peace in the region.”
She noted it would be worthwhile for Turkey to offer help and take advantage of the new leadership in South Cyprus, as the new president is the only Greek Cypriot president who has the courage to make changes as he also wanted to include Turkey in the negotiations around the EU table.
“Some people are suggesting allowing Turkey to give money to the crises to impose the Annan plan. Unfortunately, it would not be viable because the economy is different now. But if Turkey moves forward to put in a billion euros that would be a very significant, positive gesture for Greek Cypriots who always complain that Turkey has never given them anything. That would provide trust between the sides,” she suggested.