Financial Prosperity in the North
Financial prosperity in the north. UNLESS you’ve been busy hiking in the remotest part of the north’s Karpas peninsula you won’t have missed the headline news about the potentially catastrophic economic crisis in the south. And whilst in its wider European context, the south is not a major economic player, it has provided the stage for a public showdown between hardball Eurozone taskmasters and a somewhat rebellious member state. So much so it has sparked a serious debate that the entire monetary union is under threat of collapse.
And this crisis is far from averted. The Greek Cypriot Parliament may have now accepted the conditions of the EU bailout policy but this agreement, so to speak came only after unprecedented severity from the European Central Bank (ECB) with a threat to cut off funding. The prospect of becoming the first member of the Eurozone to declare national bankruptcy left politicians with little choice and the oversized banking industry in the south is now to be radically downsized – but ultimatums are rarely conducive to positive economic or political change. At best the south will continue to teeter on the brink of economic crisis for the foreseeable future, at worst this could be the straw that broke the euro’s back.
There are, of course, two sides to the economic crisis coin. Whilst Eurozone officials ordered a drastic debt haircut for Greek government bonds, many of which were held by Greek Cypriot banks, others point the finger at low taxes, high-interest rates and lax banking regulations making the south a haven for Russian billions. But economic blame aside, it is arguably the lack of accord between Eurozone leaders and member states alike that pose the greatest threat to the euro.
So whilst the euro-sceptics dine out on this financial debacle for months if not years to come, where does all this leave Northern Cyprus?
Whilst the economic crisis in the south will have Cypriot Greeks and half of Europe hot under the fiscal collar for some time yet, the Turkish Republic of Northern Cyprus (TRNC) continues to quietly prosper thanks to the political and economic division that separates the island. Not to be confused with the Republic of Cyprus that de facto only controls the Greek south, the Turkish north has remained firmly under the administration of the self-declared but nonetheless euro-free safe haven of the TRNC for thirty years now.
The TRNC falls outside both the European Union and the Eurozone. It is part of a completely different currency union. The use of the Turkish lira together with a Turkish regulated banking system means that the north enjoys healthy economic links with mainland Turkey. The TRNC has also engaged in a number of significant projects in tourism, education and agriculture as part of their economic co-operation protocol with the mainland. In turn, Turkey is the rising star of emerging market economies and whilst most of Europe will struggle to achieve 1% growth, the International Monetary Fund (IMF) has forecast 3.5% growth in Turkey for 2013.
What’s more, and without even deliberately exploiting the Greek Cypriot misfortune, the competitive edge of the north is set to benefit from the economic downturn of its neighbour. Whilst financial institutions in the south are busy fending off furious customers and its Parliament continues to reel over what some are describing as ruthless EU bailout conditions, Ersin Tatar, TRNC finance minister, predicts an influx of investors in the north.