By Loukis Skaliotis

Worrying as world events have been in the last few days, at least they will prove useful in putting to rest the totally irrelevant, on and off debate, that has occupied our island in the past few months about Cyprus joining Nato.

For Nato whose purpose was the collective security of Europe from originally the Soviet Union, but subsequently increasingly from Putin’s Russia, is soon to be a relic of the past. President Trump’s isolationist policies have driven the message home to almost all European countries (both within the EU and outside), that a new defence alliance is necessary that will not depend on the whims and tantrums of the US president.

The meeting organised in London last Sunday was a first step in that direction. A meeting attended by Canada and Turkey, in addition to a number of European countries. Even though Greece was not in attendance, the recent article of Greek Prime Minister Kyriakos Mitsotakis in the Financial Times on March 2, “Europe must spend more on its own defense”, left little doubt that Greece was in line with this initiative.

On Thursday, another meeting in Brussels was meant to explore ways of extending France’s nuclear deterrence to the rest of the EU. Germany on its part has stepped up (as I had hoped for in my article last week), and amended the debt brake provision in its constitution which will enable it to borrow more to fund the defence effort. A recent rise in Germany’s borrowing yields is the market reaction to this development and needs close attention by the European Central Bank (ECB). As if on cue, the ECB lowered interest rates by 25 basis points to 2.5 per cent on Thursday. It was, a widely expected move, rather than a response to German yields, but it could not come at a more opportune moment.

The relationship between increased defence spending and economic growth, is as I said last week, not incompatible. ( For those interested, there is an enlightening article by Maria Demertzis of the Cyprus Economic society: https://cypruseconomicsociety.org/a-credible-military-deterrent-is-economically-feasible/ ).

However, to ensure that the increased borrowing is sustainable, finding a way to utilise the frozen Russian assets held in Belgium based Euroclear is a key aspect of the whole arrangement. In that respect Cyprus may have a solution to suggest to the EU, something I will elaborate on next week.

All the above, lead to a structural change in the architecture of European defence, and let us hope that this time Cyprus can be an integral part of it. There is no room for dogmatic voices, either in support of or against the new effort. Simple, pragmatic reasoning that will recognise that defence is perhaps the first and most fundamental of public goods that collective action was supposed to provide to the citizens affected.

Turkey, with a huge border next to Russia will no doubt be interested in being part of any EU-European collective defence arrangement. Let us try to exercise the restraint and ingenuity necessary, to navigate a path that will serve us all – away from the dogmatic shackles of the past – in achieving a common objective.

Loukis Skaliotis is an economist