Any deal to reunite Cyprus risks failure unless the new federal state adopts binding rules on fiscal discipline and financial sector stability, Finance Minister Harris Georgiades warned in an interview with the Financial Times (FT) published on Wednesday.
Georgiades told the FT the new Cyprus must have a balanced budget clause in its constitution that would impose fiscal responsibility not only on the federal government but on the autonomous Greek Cypriot and Turkish Cypriot entities that would run most day-to-day affairs in the two communities.
“It is imperative that the new union doesn’t allow itself to face fiscal issues and that one of the two constituent states doesn’t steer off course, because the federal union itself would then be in trouble,” Georgiades said.
The Turkish Cypriot banking sector would also need close attention, he said. “It’s a bit of a wild-west situation. Nobody knows enough about ownership, capitalisation and supervision in the Turkish Cypriot banking system,” he added.
Georgiades said he considered reunification, in principle, as “a win-win situation” for both sides.
“At the moment, it’s as if we don’t exist for Turkey and Turkey doesn’t exist for us,” he said.
Sectors that would benefit would include the island’s shipping industry, which he said, would double its business overnight if a settlement was reached.
The Turkish Cypriots, he said would benefit from access to the EU market and EU regional aid funds.
On natural gas, Georgaides said it was too soon to speak of exporting the gas via a pipeline to and through Turkey. “First things first. Currently, we cannot even export olive oil to Turkey, let alone petroleum, oil or natural gas,” he said.