EU focus on Cyprus blurred by division

Cyprus, represented internationally by the Greek Cypriots, has been preparing proudly for its moment in the European spotlight, determined to prove it has come of age as a valuable member of the euro zone that can punch above its weight.

Beta V.1.0 - Powered by automated translation

The small and divided Mediterranean island nation of fewer than a million people takes over the bloc's rotating presidency today, just days after becoming the fifth euro-zone member to request an emergency bailout. Cyprus's outsize banking system is heavily exposed to debt-crippled Greece.

Cyprus, represented internationally by the Greek Cypriots, has been preparing proudly for its moment in the European spotlight, determined to prove it has come of age as a valuable member that can punch above its weight in the bloc of 495 million citizens that it joined eight years ago.

The EU's easternmost outpost sees itself as a strategically located bridge between Europe and the Middle East. Although geographically Cyprus is closer to Beirut than Berlin, most Cypriots look west, feeling culturally and historically rooted in Europe.

Cypriot city centres have been spruced up, taxi drivers instructed to be on their best behaviour and schoolchildren drilled for island-wide celebratory parades today.

Cyprus's main task over the next six months will be to help steer Europe out of its financial crisis by securing agreement on the financial framework of the bloc's budget until 2020.

Yet on Monday, just a day after the presidency handover from Denmark, officials from the European Commission, the European Central Bank and the IMF arrive in Nicosia to evaluate how much Cyprus needs from the bailout fund. Experts say it could be as high as €10 billion (Dh46.51bn), more than half Cyprus's €17.3bn GDP.

"It's a tough time for Cyprus to take the reins. It's not just Cyprus that is struggling. Europe is in the middle not only of a financial crisis, but also an existential one," said James Ker-Lindsay, an expert on south-eastern Europe at the London School of Economics. "But in terms of the administrative level of running a presidency, I think Cyprus is going to do just fine."

Demetris Christofias, the president of Cyprus and the EU's only communist leader who once jokingly referred to himself as the bloc's "red sheep", has been accused of brinkmanship by opposition parties and local media for leaving the bailout request until the 11th hour.

He was reluctant to seek EU aid, fearing Brussels would - and probably now will - demand unpopular austerity measures in return. Instead, he desperately sought a loan from Moscow, where he studied during the Soviet era. He has better contacts with the Kremlin than the White House or Downing Street. Mr Christofias still seems to hope that Russia, which provided Cyprus with a 2.5bn euro loan last year, will deliver again. But amid confusing signals this weekend, the Russian finance ministry said it has yet to receive an official loan request from Nicosia.

"It would have been a lot worse for Cyprus if Russia had coughed up. A lot of people in the EU would be asking what Moscow wanted as payback," Mr Ker-Lindsay said in an interview.

A European diplomat in Nicosia said Cyprus should have gone for a bailout two weeks ago, when Brussels pledged €100bn for Spain's ailing banking sector. "Cyprus's request is just small change and would have gone largely unnoticed," he said.

Cyprus's EU presidency faces another challenge. Turkey insists it will boycott all EU meetings chaired by the Greek Cypriots for the next six months, even though that could further damage Ankara's already uncertain hopes of joining the bloc.

"By being so awkward, Turkey is not showing the sort of European spirit that most EU members would expect," Mr Ker-Lindsay said in an interview.

The Greek Cypriots have pledged not to use their presidency as a "bully pulpit" to pressure Turkey, insisting it would put European interests before any national concerns, and serve as an honest broker.

Cyprus has been divided since 1974, when Turkey invaded the north following a short-lived coup in Nicosia engineered by the military junta, then ruling Athens, aimed at uniting the island with Greece.

Turkey has no relations with the internationally recognised Republic of Cyprus, instead backing a self-declared Turkish Cypriot state in the north of the island which only Ankara recognises.

Leaders of the island's Greek and Turkish Cypriot communities have been engaged in fruitless UN-sponsored peace talks for decades, aimed at reuniting Cyprus under a federal system.

The latest batch of negotiations, launched in 2008, are now on hold until the end of Cyprus's EU presidency and the Greek Cypriot general elections next February.

For Theodore Panayotou, a Harvard University professor, Cyprus's division is now emblematic of a divide within the bloc itself, between a "prosperous northern Europe and a languishing south".

Writing in the Cyprus Mail newspaper, he asked: "How credible can a union of 27 states aspiring to a federation be when a mini-state of under a million people has split into two tiny states that cannot find a way to unite under a federal state?"

Cyprus, with its historically resilient and resourceful economy, counts itself better placed than many of its EU partners. Multibillion-dollar gas reserves were recently discovered off the island's southern coast, although they could take five years to yield cash dividends.