Wednesday, 20 June 2012

In Cypriot hands

When Cyprus was admitted to the European Union in 2004, it was hoped that membership would help unify the divided island into a single state once again. But in an ironic twist of fate, the EU itself may be divided while it is under the leadership of Cyprus over the next six months.

On 1 July Cyprus will take over the rotating 6-month presidency of the European Union from Denmark. It is almost the perfect storm of fragility – the union is set to be led by one of its weakest members at a time when its own weakness threatens to tear it apart.

The Greek Cypriot government, which is the one that will be taking over the presidency, rules over just 800,000 people - fewer than live in the EU’s ‘capital city’ Brussels. This of course excludes the 300,000 Turkish-speaking people in Northern Cyprus, a self-governing break-away territory that has been separate since the country’s civil war in 1974. But as the EU does not recognise the existence of Northern Cyprus, nominally the entire island is taking over the presidency.

Turkey, whose military still occupies Northern Cyprus, is the only country that recognises it as a country. The Greek Cypriot government considers itself to be the ruler of the whole island, as does the EU. But they are effectively two separate countries in an open state of war, but with a cease-fire.

It may seem strange that a country at the centre of an unresolved military conflict would be admitted as an EU member state. And of course, it is strange. But a big part of the explanation is that Cyprus's accession was exacted by Greece in exchange for it signing off on any other accession state.

Greece was an early EU member, joining in 1981 well before countries like Spain, Sweden and Austria. During the 10-year negotiations running up to the massive 2004 accession of 10 countries (pictured at left), it is an open secret that Greece threatened to veto the entire group if the EU did not admit Cyprus. Cyprus would not necessarily have been on the shortlist for accession considering its geographic location (technically in Asia) and its open conflict, had Greece not insisted on its admittance.

There had already been an attempt to annex Cyprus to Greece in 1974, an event which prompted the war with Turkey. Greece may have seen the EU accession as something that would finally pressure Turkey into leaving the occupied territory of the North, making Cyprus a united island (under Greek dominance) once again. If Cyprus could not be part of Greece, it could at least be a separate entity within the same federal union – with free movement and free trade.

But Turkey never budged, and they do not see Greek Cyprus as a legitimate country. Ankara has said that over the next six months they will boycott the Presidency of the EU. No one here seems to be quite sure what that means, since Turkey will not be boycotting the EU itself. But at the very least it will mean there can be no EU-Turkey events or high-level negotiations in the second half of 2012.  

Grexit, Cyprustay 

According to media reports Cyprus is likely just days away from requesting a bail-out from the EU. Cypriot banks are very inter-connected with the Greek economy, and they have suffered immensely. The thought is that Cyprus must request this bail-out before it takes up the presidency, lest it be in the awkward position of requesting a bail-out from…itself. Having the country holding the EU presidency ask for a bail-out will also be quite embarrassing for the EU.
Despite the Greek election result on Sunday, which will keep Greece in the eurozone and in the EU for the moment, it is still a very real possibility that Greece will have to leave the euro by the end of the year. A very likely consequence of that may be that Greece has to leave the EU.

It would be an immensely strange outcome if Cyprus is left in the EU all alone after the country that insisted on its accession is kicked out. It would be all the more strange for Cyprus to be the one at the EU’s helm when Greece is given the boot. 

A tough challenge

The fact that the Cypriot government seems ill-prepared for their time at the helm is causing anxiety in Brussels. Just ten days before the start of their presidency, they still have no web site and no formal calendar. Their office in Brussels remains understaffed (although they are supposed to be getting an influx of civil servants from Nicosia in the next week). On international issues and many technical issues, the Danish presidency has said they will be stepping in to help Cyprus to fill the gap.

It may be that the Cyprus presidency will simply step back from any involvement with the eurozone crisis. After all, since the Lisbon Treaty took effect in 2010 the rotating presidency no longer presides over the European Council of heads of government – that job is now done by the first ‘EU President’ Herman van Rompuy.

The rotating presidency now leads only the councils of ministers – which are made up of the various national ministers for subjects like finance, environment and agriculture. But some of these councils are crucial to the eurozone crisis – Economics and Finance (Ecofin), general affairs, foreign affairs, competitiveness and justice are all councils which will be run by the Cypriots.

Ecofin councils have been the scene of some of the fiercest debates in this crisis and it’s where many of the major decisions have been made. The Danish presidency was crucial in guiding these councils over the past six months.

As for the other councils, the agenda looks like its going to be pretty light. Many of the most controversial dossiers, such as reform of the Common Agricultural Policy (CAP) and the Common Fisheries Policy (CFP) are essentially being put on hold until the start of the Irish presidency on 1 January. For international negotiations, it has already been confirmed that Denmark will be leading the EU negotiations at UN climate talks in Doha in November, rather than Cyprus.

One might ask, is this any way to run a union? It would be a bit like handing over the US cabinet agencies to Kentucky for six months. There was much debate over whether the rotating presidency should continue after the Lisbon Treaty, but in the end it was decided that it symbolically important for each member state, no matter how large or small, be able to hold the reigns of power for some time. Of course, at that time, people weren’t anticipating the crisis that was about to engulf the EU.

Many federalists would argue this is the potential result that can arise when EU accession is done for the wrong reasons. The UK and the United States continually push core countries like Germany and France to admit new EU member states, particularly Turkey. It was the UK that was the biggest driving force behind the 2004 enlargement, despite French reservations.

But enlargement can’t be used only as a method of resolving armed conflicts, opening new markets, or bringing countries into the Western camp. The EU is not a free trade zone, as much as the UK would like it to be. New member states are having an integral part in EU governance. In boom times this may seem like less of a concern. But in times of crisis, this becomes ever-more important. 

It is the toughest of times for Cyprus to be taking up this daunting challenge. Time will tell whether it all works out.


Anonymous said...

Interesting post, and am totally agreed it's crazy to leave a country as unprepared as Cyprus in charge of som much EU activity at a time like this. That has to change.

But a couple of points

- Do you really think leaving the Eurozone will mean Greece leaving the EU? Somehow even with leaving, I'd never considered that Germany would actually force Greece to leave the union altogether - is that the current gossip in Brussels?

- It's also worth noting that there was a very good opportunity for Cyprus to reunite prior to accession with the Annan plan, which would have reunited the country. The Turkish half voted yes, but it was the Greeks who vetoed it in a refererendum. It was a *massive* missed opportunity, sadly, and would have made an eventual Turkish accession to the EU a hell of a lot easier and smoother.

GulfStreamBlues said...

It's an open question that isn't really being addressed. There is technically no way for a country to leave the euro without also leaving the EU (because the treaties do not allow a country to leave the euro). So some kind of rapid exit-reentry would have to be arranged. But given the predictions of calamity for the country if they revert to the drachma, there is a question of whether the 'new Greece' would meet the minimum requirements of EU membership. Every EU country would have to approve their rejoining. In the end they may find some way of working around the treaty's lack of a euro exit scenario. But it seems like nobody wants to cross that bridge until they come to it.

GulfStreamBlues said...

On your second point, what happened in the 2004 referendum was exactly what those against Cyprus's accession were arguing in the 1990's. They said allowing Greek Cyprus to join with no strings attached (as insisted by Greece), and only requiring them to hold a referendum without making accession dependent on the result, they were giving the Greek Cypriot people no incentive for reunification.

BlogCyEu said...

Handling the Presidency of the Council of the Europe Union is over rated, especially in that it does not reflect preparedness of any country because of the dedication by persons which have been working for 2 years on this. I believe one has to look for the crazyness in a different place, other than the presidency, and won't have any problem finding it.