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26/09/2016

MEP: The Cypriot economy will be hard hit by a Brexit

UK & Europe

MEP: The Cypriot economy will be hard hit by a Brexit

Buffer zone wall, Nicosia.

[James Crisp/Flickr]

Cyprus has many reasons to worry about the economic consequences of a British withdrawal from the EU, MEP Takis Hadjigeorgiou told EurActiv Greece.

Cyprus maintains strong bilateral relations with the United Kingdom, which reflect the historical ties between the two countries dating back to the 19th century, when it was a British colony. They are both members of the EU and the Commonwealth. Cyprus gained its independence from Britain in 1960.

Legally the UK, together with Greece and Turkey, is a “guarantor” of the independence and territorial integrity of Cyprus.

Under the 1960 independence agreement, the United Kingdom also retained the Sovereign Base Areas of Akrotiri and Dhekelia, which is a British overseas territory on the island of Cyprus.

The bases play a vital role in projecting British power in the region, as they host a signals intelligence station for surveillance in the Middle East, and an air base. RAF fighter bombers, reconnaissance aircraft, and drones, are currently flying sorties in Syria out of Cyprus.

The two countries have also strong economic bonds. According to Eurostat, the UK is Cyprus’ second largest trading partner,  and its most important trading partner in services.

Tourism

Cyprus is also a popular tourist destination for Britons. The number of UK tourists reaches 1 million annually, equivalent to almost 50% of all tourist visits to the island.

“Possible devaluation of the English pound accompanied with Britain’s reduced growth rate will adversely affect the British tourist arrivals in Cyprus,” leftist MEP Takis Hadjigeorgiou [Cyprus, GUE-NGL] told EurActiv.

Hadjigeorgiou referred to an academic study commissioned by Bloomberg, in which Cyprus ranks sixth among the countries that will be heavily affected by a Brexit in terms of per capita income.

“In the best case scenario, the loss of Cypriot citizens’ per capita income will be almost 4% while in the worst case will reach close to 8%, due to the close tourist and economic ties between the two countries,” Hadjigeorgiou stressed.

Tax harmonization

The Cypriot MEP added that another consequence for Cyprus would be on the EU’s tax policies, particularly efforts to harmonize EU tax systems.

The biggest political obstacle to such harmonization arises from Britain which, along with some other member states including Cyprus, favors low tax rates.

A Brexit will lead to the imposition of tax harmonization with a possible negative impact on Cyprus, he said.

Diaspora votes against a Brexit

The National Federation of Cypriots in the United Kingdom, which represents Cypriot community associations and groups across the UK, has encouraged its members to vote against a Brexit.

Currently, there are more than 300,000 Britons of Cypriot origin in the country.

Residents of Britain originally from Cyprus and Malta are the only citizens of other EU member countries having the right to vote in the referendum because of their countries’ membership in the Commonwealth.

Christos Karaolis, president of the organization, recently told the Cypriot KYPE news agency that Cyprus would profit much more if the UK ultimately remains in a united EU.

“We encourage (the) Cypriot diaspora in the UK to vote against a Brexit,” he emphasised.

Political implications

According to the MEP, a Brexit will have greater political consequences for the EU.

“A possible Brexit will strengthen centrifugal tendencies that already exist in the EU and further destabilize the existing balance of power between member states in the decision-making process […] resulting in an enhanced German presence in the EU.”

He added that a Brexit would weaken the special relations between the US and the UK and would further downplay British diplomacy in the Mediterranean.

Marios Evriviades, an academic specializing in Cypriot affairs at Athens’ Panteion University, told EurActiv that for Nicosia, the EU’s cohesion was crucial.

Evriviades argued that Cyprus’s membership in “a strong EU helps it survive as a sovereign state […] something that Turkey is fighting against”.

He stressed that Cyprus did not join the EU for economic reasons, but political ones. “Because in foreign affairs, the accession to the EU was the most important event that occurred after its independence.”

For Evriviades, a Brexit will mean a weakened Europe. Therefore, Cyprus will lose its political advantage of its EU membership.

But all these scenarios are “conditional”, he noted.

“Maybe [Britons], as old imperialists and colonialists, can see a bit further than the others […] probably they see an EU collapsing and want to jump the ship?” Evriviades wondered.

Turkey also affected

A Brexit will not leave Turkey unaffected either.

Hadjigeorgiou said that the UK had been traditionally the strongest supporter of Turkey joining the EU, and as such, the member state with the most intense interest in finding a solution to Cyprus problem.

“Any influence on Turkey in relation to the Cyprus problem which this situation granted the British government will obviously disappear,” the MEP stressed.

Along the same lines, Evriviades said that Britain’s involvement in Cypriot politics was negative.

“Britain takes an almost vulgar pro-Turkish stance […] in the diplomatic background of the Cyprus issue, Britain is everywhere.”

“Epic battles are taking place at the UN Security Council, and every time a resolution comes up, Britain interferes as a ‘water carrier’ (for the) Turks,” Evriviades concluded.

 

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