By Elias Pantelides
So many numbers have been mentioned as a possible cost of a Cyprus solution cost that one has to smile and recall the classic quote, ‘You have lies, damned lies and statistics’.
Five, ten, fifteen, twenty-five, fifty, eighty billion euros are numbers which have been floated about. The truth is nobody knows, nobody can estimate and reliable international bodies are only happy to put forward multiple scenarios, with numerous caveats and provisions. The reason nobody can estimate a reasonably correct number is quite simple: there are too many unknowns in the relevant equation.
Territory solution. First unknown
The island of Cyprus, covers an area of 9,251 square kilometres. The Republic of Cyprus currently controls 5,295 square kilometres of the island’s territory. The British sovereign base area extends to 254 sq. km, the UN buffer zone is about 346 sq. km and finally the ‘TRNC’ /Turkey controls 3,355 sq. km. The corresponding percentages are 57 per cent, 3 per cent, 4 per cent and 36 per cent.
Britain’s Minister of State for Europe, Alan Duncan, has recently repeated an offer to return some land from the British bases as a goodwill gesture towards a new state of affairs in a united Cyprus. Furthermore both Cypriot leaders have published their agreement on one of the three basic issues of the territorial aspect of the Cyprus problem, namely they seem to agree on a percentage of 28.7 for a Turkish Cypriot constituent state give or take a half percentage. However a map cannot be agreed unless and until two related and crucial problems are solved. Population and coastline aspects are still pending and burning issues.
Property solution. Second unknown.
The property issue is another part of the problem which is hard to solve. Dispossessed owners should have their rights respected as to restitution, exchange and or compensation, and then complexities regarding the sentimental rights of current users creep in.
With both territory and property issues still subject to final negotiations, nobody can accurately predict a solvable financial equation. Even Albert Einstein and Maynard Keynes could find it hard to come up with a right magic number. The quantity and quality of properties to be compensated will depend on many factors and no reasonable estimates can be formulated as to a numerical value in money terms. A very brief example can be given by stating that two Karpasia villages, Rizokarpaso and Yialousa, cover an area slightly in excess of 200 sq. km. and have a coastline which exceeds ten per cent of the island’s total. Their final classification as part of the Turkish Cypriot or Greek Cypriot constituent state or either may alter significantly any compensation scenarios.
Post-solution development economics.
Keynesian economics advocates a mixed economy – predominantly private sector, but with a role for government intervention especially during recessions. A major tool for development has always been a redistribution of wealth, namely land. The most affluent land owner in Cyprus is the Republic of Cyprus, being the owner of state and forest land. The ability to use state land for the common good for all legal citizens is only limited by the ability to imagine possible solutions. Redistribution is only one of them which entails no financial burden on the public coffers.
Capital infrastructure is not a solution related expense.
Schools and hospitals, clinics and universities, public roads and highways, ports and airports, government and municipal buildings even public playgrounds have never been classified as merely a profit and loss item in state finances. To claim otherwise is wrong in social, economic and financial terms.
A post-solution Cyprus should be able to finance in a sustainable way its future growth and development by improving its competitive advantages, in a most competitive world. Having said that, it is well known by now that any economy without prudent fiscal policies and appropriate check and balances is bound to destruction.
Time factor complicates economic forecast.
In the long run we are all dead. Both Keynes and Nicos Kazantzakis have famous quotes on this. The Cyprus problem has been long running and what complicates things further is the fact that the accuracy of financial predictions seem to deteriorate with time.
In the case of the Cyprus problem, the base year is 1963 for many Turkish Cypriots and 1974 for many Greek Cypriots. The property numbers seem to increase in an amazing way depending on the years and the compounding factor. Ignoring for a moment all exogenous factors, a property worth one thousand euros in 1963, in 2018 that same property could be either 1,729 euros or 14,636 or 189,059 euros depending on the compounding factor. The table (left) speaks for itself. The indexation of the property annual increase could be considered as arbitrary. This is negotiable and debatable, however what is not debatable is the fact that the Cyprus problem has never been financial.
Elias Pantelides is an economist