The Cyprus Anomaly: Why the EU should give Britain more flexibility

Neil Wilson cites Cyprus as an example why the EU should give Britain more flexibility.

CYPRUS’S existence as an EU nation is a thumb in the eye to David Cameron’s Europhile detractors. An example of the à la carte Europe we’re constantly told we cannot have, those with an interest in the future of the Eurozone, and indeed, the EU, should focus on the tiny Mediterranean island where the first round of voting in the Presidential elections is due to take place on 17 February.

Cypriot EU accession was only meant to happen on the basis of an agreement to reunify the island in 2004. As we now know, the Annan Plan was rejected in a referendum and the accession went ahead regardless. As the EU doesn’t recognise the self-declared ‘Turkish Republic of Northern Cyprus’ (in fact, only Turkey does), its acquis communautaire legally apply to the whole island. As such, the North qualifies for European cash, which is simply convergence money by another name.

Focussing on the South, EU membership exists when the government the EU views as legitimate can’t even guarantee the rights of its citizens under Schengen (incorporated into EU law in 1997) can be enforced within its legally constituted territory, hence the suspension of Schengen for the time being.

This is all central to the election but throw Cyprus’s current banking issues and economic woes into the mix and it may be about to get even more complex.

The country is yet to agree terms of a bailout after an economic bust that revealed banking excesses and illegality that made Britishcyprus aerial banks seem positively prudent. A troika of the IMF, European Commission and European Central Bank have spent the last eight months in negotiations. Public sector pay cuts have been implement and thousands of unsustainable jobs done away with.

The first televised Presidential debate on Monday saw eleven candidates go head to head. The three candidates most likely to win are supported by a curious mixture of parties. Poling in front is Nicos Anastasiades, of DISY (Cypriot-orientated centre-right) who is also being supported by part of DIKO (a hellocentric centre-right party), part of EVROKO (the centrist ‘European Party’) and part of the Green Party. The other two frontrunners are Stavros Malas (AKEL, a former Communist party which has now mellowed slightly) and Georgios Lillikas, holding together the rest of the Greens and EVROKO and EDEK (centre-left).

The candidates’ attitudes to the bailout are strikingly different. Malas seems to relish his position as AKEL’s fall guy, with his party insisting that privatisations were not an option. Anastasiades has hinted that he will overhaul that which cannot be privatised, implying that what can be sold off as part of securing a bailout, would be. If, as expected, he is the next president, a bailout will look more likely.

This will put the island’s economy in a dangerous position – the £17 billion estimated to be needed to recapitalise its banks, refinance state debt and cover fiscal deficits will raise debt to 150% of GDP. And the economy will still be forecast to shrink.

Cyprus will join Spain, Ireland, Italy, Portugal and Greece in the list of countries that have never any hope of complying with the Stability and Growth Pact which was meant to ensure financial stability in the Eurozone. Once again the goalposts have been moved.

Comparing the UK and Cyprus I am not – decades of intercommunal conflict, invasion, ongoing occupation, Russian money-laundering and exposure to the minefield that is the Greek economy have brought Cyprus to this point. We have relatively little of the instability that is part of Cypriot life.

This does however demonstrate that the EU has a level of flexibility built into it capable of dealing with the legal, economic and military muddle that is Cyprus. If the EU can bring itself to accommodate the realities of life and public opinion there, then why can’t we eat à la carte as well?

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