‘The only reason there is some life in the market is because of the money flowing from the south’
By Esra Aygin
As Turkish Cypriots go through one of the worst economic crises in their history, Greek Cypriot spending in the northern part of Cyprus has proven to be a significant contribution to the ailing sectors from hospitality to retail.
For some businesses such as restaurants, the income from Greek Cypriots has meant that they could stay afloat.
“In the past year, it has been the Greek Cypriots, who have made it possible for the food sector to survive,” says head of the Turkish Cypriot Restaurant Owners Association, Salih Kayım. “Turkish Cypriots cannot not afford to go to restaurants anymore.”
The Turkish Cypriot economy has been in free-fall in recent years, as the Turkish lira lost 44 per cent of its value in 2021 and shed a further 22 per cent this year. Its fall in value has led to soaring prices where the economy is dependent on imports. The annual inflation rate reached 120.32 per cent in September. Although the official currency in the north is the Turkish lira and people’s salaries are also paid in lira, many expenses like rent and school fees are in foreign currencies, which exacerbates the situation.
As Turkish Cypriots experienced a huge drop in their purchasing power leading to a decline in their living standards, the devaluation of the Turkish lira made the north very attractive for Greek Cypriots, whose official currency is the euro. They started forming huge lines at the crossing points to come to the north for petrol, pharmaceuticals, clothes and even hairdressers and dentists.
This prompted opposition Republican Turkish Party CTP head Tufan Erhürman to say last week, that “we have come to a point where the Turkish Cypriots are watching while the [Greek Cypriots] are shopping.”
For the first time since the crossing points opened in 2003, there now are more Greek Cypriot crossings than Turkish Cypriot crossings. Between January and August this year, 1,883,000 crossings to the north were recorded by Greek Cypriots. During the same period, Greek Cypriots spent almost 30 million euros just with their credit cards. This figure doesn’t include cash spendings.
This is why the Turkish Cypriot Chamber of Commerce, Turkish Cypriot Chamber of Industry, the Turkish Cypriot Travel Agencies Association, the Turkish Cypriot Chamber of Shopkeepers and Artisans, Turkish Cypriot Restaurant Owners Association, and Turkish Cypriot Hoteliers Association are calling on the Turkish Cypriot administration to ease the crossings and open more crossing points.
“The only reason there is some life out there on the market is because of the money flowing from the south,” chairman Ali Ardıç of the board of the Chamber of Shopkeepers and Artisans says. “If this stops, businesses would go bankrupt. We have to understand this… The faster the crossings are, the better for us… This should be a priority because many sectors are kept alive only because of the crossings.”
The south’s contribution to the north’s crisis-ridden economy is not limited to Greek Cypriot spendings, economist Merkan Hamit explains.
Trade across the Green Line, whereby Turkish Cypriots sell certain goods to the Greek Cypriots, has generated a revenue of 8 million euros so far this year, according to Hamit. Boosted by the devaluation of the Turkish lira, sales through Green Line trade are expected to double compared with last year and reach 12 million euros by the end of this year.
This will be the highest in 18 years, according to İzzet Adiloğlu, the deputy secretary-general of the Turkish Cypriot Chamber of Commerce.
Another way the south is contributing to the north’s economy is through the Turkish Cypriots, who are working on the southern part of the island and living in the north. Although their official number is around three thousand, the real number is believed to be around six thousand. Assuming they earn the minimum wage, this constitutes a contribution of 50 million euros to the Turkish Cypriot economy, says economist Hamit. “This is the invisible services export between the north and the south.”
The Greek Cypriot spendings in the north, the sales to the Greek Cypriots through Green Line trade and the money earned by the Turkish Cypriots working in the south, all together constitute a revenue of an annual 200 million euros for the north, according to Hamit. This is 12 per cent of the Turkish Cypriot GDP, which is a significant amount, he says.
At least half of this cash flow from Greek Cypriots to Turkish Cypriots is through petrol stations.
“All this economic contribution is despite the fact that we keep Greek Cypriots waiting at the crossing points for hours, despite the daily insults by Turkish Cypriot authorities against Greek Cypriots, despite the negative attitude the Greek Cypriot authorities have regarding the crossings, and the Green Line trade,” Hamit says.
For comparison, as of the end of September, the total amount of money as part of the Turkish aid transferred to Turkish Cypriots was around 63.8 million euros. Out of this, 38.9 million euros were allocated to defence expenses. From the remaining amount, 21 million euros were allocated to investment projects including the controversial “Külliye” project and the upgrading of the Ercan/Tymbou airport. Less than 4 million euros were allocated to investments for the real economic sectors.
Economist Hamit draws attention to a “lack of vision” when it comes to the failure of Turkish Cypriot authorities to bank on this potential and develop policies to maximise the economic integration of the northern and southern parts of the island.
“The dominant actors in the Turkish Cypriot political life base their arguments on good relations with Turkey,” says Hamit. “Despite the fact that the money coming from there is peanuts if you take out the defence expenses, they will not do anything to damage the relations because that is how they win elections… For this reason, they do what they know best. They continue the rhetoric of ‘motherland,’ ‘nation,’ ‘flag’ and they look at this new dynamic with Greek Cypriots through an ethno-nationalistic perspective…. Because the society still believes in the fairy tale that the most loudly nationalistic ones will have the best relations with Turkey, and that this will bring welfare.”