Research proposes adapted model to solve the Cyprus problem in a way that would lead to positive results


An adapted model for the solution of the Cyprus problem that emphasises bringing Cypriots together rather than keeping them apart, which at the same time remains true to historical agreements, has the best chance of achieving socioeconomic convergence and political stability according to new research.


The Report, entitled “The Political Economy of a Cyprus Settlement: The Examination of Four Scenaria”, by Professor Andreas Theophanous of the cceia of Nicosia and Director of the Cyprus Center for European and International Affairs, was published by the International Peace Research Institute, Oslo (PRIO) and presented at Ledra Palace to a wide audience on June 19th.


Following the presentation of the Report by Andreas Theophanous a three-person panel of experts comprising former finance minister, Michalis Sarris; Lecturer in International Relations at EMU, Erol Kaymak; and Fellow of Wolfson College, Oxford and an Associate Fellow of Chatham House (the Royal Institute of International Affairs), Max Watson, commented on the findings and put forward their own suggestions.


In his Report, Professor Theophanous challenges a common assumption: that the economic impact of a solution would roughly be the same regardless of the form of the solution.  Theophanous stresses that each form of a solution leads to different economic results.  This research is therefore also an attempt to address the absence of any systematic study on the compatibility of the various constitutional models with important economic objectives.


Theophanous examines the economic impact of four different scenaria:

a) bizonal bicommunal federation,

b) stalemate/continuation of the status quo,

c) two-state solution and

d) functional federation with loose bizonality. The latter is described as “a special case of a bizonal bicommunal federation”.


While taking each scenario in turn, the research takes into consideration the new international economic environment and especially Cyprus’s membership of the EU and the eurozone.  Theophanous stresses the significance of the relationship between constitutional arrangements and economic structure, which in turn influences economic outcomes.  He acknowledges, however, that in order to devise a model that will be politically acceptable and sustainable, it is important to take into consideration the two communities’ perceptions and misperceptions about themselves, their history and “the other side”.


Each scenario is examined in relation to its impact on a range of important issues/variables: the property issue/arrangements and compensation, the decision-making process, fiscal policy  and other macro-economic variables such as employment and prices, local administration, the legal framework, economic development, competition, tourism, the freedom of movement, freedom of settlement and the freedom to hold property throughout the island, settlers and immigration, the labour market and social security, education, health, consumer protection and the environment.


A model based on the mainstream version of a bizonal bicommunal federation, like the Annan Plan, would lead to problematic outcomes despite some positive effects. Enhanced bizonality and strong bicommunalism would not encourage the emergence of common objectives and of a common vision. The constitutional structure of this model is such that it would require dual majorities in most cases, argues the Report. This would lead, among other things, to economic and political bottlenecks. Fiscal problems could also ensue given the “three-headed state embedded in the model” and “potentially conflicting fiscal policies”. “This would most likely impede the process of economic convergence of the two regions”, and additional problems will also arise if the socioeconomic gap between the two parts grows further.


The continuation of the status quo “entails severe losses, foregone opportunities and a much more difficult political environment”. Resentment by Greek Cypriots of the rights and in some case of the privileges enjoyed by Turkish Cypriots in the Republic of Cyprus without obligations may arise, particularly as Greek Cypriots witness the continued exploitation of their properties in the northern part of Cyprus. The Report notes that the reduction in the number of crossings by Greek Cypriots to the northern part of Cyprus may be indicative of this prospect.  In case the stalemate persists, Theophanous notes that it is important to manage the situation in a constructive way while at the same time maintain a debate at different levels about a final settlement.


A two-state solution would, it is assumed, be based on a “land for recognition” formula with 72,5% for the Republic of Cyprus and 27,5% for the “TRNC”. The guarantee system would be abolished and the status of the British Bases would be renegotiated. The implementation of this scenario would create an economic boom on both sides due to the wealth effect (of land return, compensation as well as the legitimization process) and other factors. There could be mutual benefits if the two states cooperate and the “TRNC” embarks on a path of modernisation and Europeanisation. However, the Report also sounds a strong warning. “If, on the other hand, the “TRNC” remains under the strong influence of Turkey, and the socioeconomic gap with the Republic of Cyprus grows further one should not rule out some form of antagonism and cold relations”. The Report adds that this could lead to lack of cooperation over illegal immigration and restrictions on freedom of movement in the island.  The author notes that the implementation of such a model is extremely difficult, if not impossible, because of serious domestic and external constraints.


The functional federation with loose bizonality model falls within the philosophy of the high level agreements of 1977 and 1979. “The fundamental element of this model is that it encourages the two communities to cooperate”, says the Report. A key feature of this model is the President from one community and the Vice-President from the other, who would both campaign on a single ticket. Other features include the use of double majorities only in special circumstances. It therefore “supports the expectation that the decision-making process will be effective”. While encouraging integration it also “acknowledges the particular characteristics of the two communities as well as their needs” regarding the traditionally difficult issues of property, residency and political representation.


A functional federation with loose bizonality would, by emphasising integration, avoid the deadlocks of the classic bizonal bicommunal model. At the same time, however, “it would incorporate the historical compromise of a bizonal bicommunal federation with the objective of integration”. Professor Theophanous argues that this model would encourage common social and economic goals.  “Greek Cypriot tax payers will be more willing to endure sacrifices if there is a vision of a common country and a common future”, he argues.  According to Theophanous the implementation of this model may generate an economic miracle and have positive repercussions beyond Cyprus.



The Report is downloadable at