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Our View: No surprise politicians ignore positive economic benefits of a solution

UN special representative Elizabeth Spehar

In the last few weeks there have been two reports about the economic benefits of a Cyprus settlement compiled by economists at two very different organisations – PRIO (Peace Research Institute Oslo) Cyprus and the World Bank. Both reports make forecasts of high rates of growth and significant increases in the standard of living in the years after a settlement.

PRIO’s ‘Cyprus Peace Dividend was first compiled in 2014, when the Republic was deep in recession but was revisited and updated recently. The continuing division would “act as a drag on competitiveness, productivity and job creation, especially for women and the young, and leave both communities vulnerable to economic shocks,” it said.

A united Cyprus, in contrast, would boost tourism, shipping, construction and professional services but primarily wholesale and retail trade. Within the first 20 years of a solution, average incomes would be between €6,800 and €11,000 higher than without a solution, while the rate of growth of GDP would be, on average 3.8% compared to 2.3% without a solution.

A second report, compiled by the World Bank and the Office of the Special Advisor to the UNSG in Cyprus also saw a peace dividend, but warned that with each failed round of negotiations the cost of the stalemate rises because foregone benefits were unlikely to be restored at the time of a settlement. This report still forecast that a settlement would ensure an additional 0.4% increase in the annual rate of growth of GDP in the Greek Cypriot community and an additional 1.8% in the Turkish Cypriot community.

Do we need such studies to inform us about what should be obvious to anyone with some common sense? Of course, GDP would increase when the country is united – the market would become bigger, there would be a construction boom, investment and more consumer spending, just to mention a few benefits. The problem, however, is that there are also large sections of the population that benefit economically from the continuing division and would not want to put their interests at risk.

It is no coincidence that the bigger funders of the ‘no’ campaign among Greek Cypriots in 2004 were the big developers selling properties at a premium. Businessmen in the north that built hotels or tourist complexes on Greek Cypriot properties were also against a settlement. In fact, the hoteliers on each side would not like competition to increase. In the south there is also a huge number of public employees that would never want to risk the big wages and pensions they enjoy on a settlement that would not make them better off – it is the private sector that would benefit from reunification.

Is it any surprise that our politicians and top civil servants always focus on the theoretically negative political aspects of a settlement but never on the positive economic aspects?



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