The Challenges Ahead for the Republic of Cyprus


Suggestions to the Polity


Working Group

Headed by:

Professor Andreas Theophanous


The Republic of Cyprus will assume in a few weeks, the Presidency of the Council of the EU a development which only a few years ago would have been considered unthinkable. Serious challenges require new approaches and radical changes. Beyond the Presidency, comprehensive approaches are also demanded in addressing the country’s structural economic problems, managing the energy issues, dealing with the Cyprus problem and relations with Turkey, and upgrading the role of Cyprus in the regional, European and international environment. To address these challenges successfully it is necessary to summon scientific knowledge, political will, courage and the broadest possible consensus. This Report, which puts forward a total of 21 suggestions, seeks to contribute to the necessary brainstorming at this crucial time. The full Report is posted on the Center’s website (Greek section).


In relation to the Cyprus EU Presidency particular importance is afforded to the contribution that Cyprus can make to the debate in Europe regarding the fiscal union. The Report adopts the view of balanced budgets within a specific but broader than the annual time framework, an approach that was known as the Swedish budget philosophy in the 1950s. On this basis it is possible to give emphasis on a growth dimension making it feasible to implement a discretionary expansionary fiscal policy in times of economic recessions and/or crises.


The Report also recommends the involvement of think tanks and of society at large in designating and prioritising the vital issues pertaining to the future of the EU. In short, Cyprus should participate fully in the wider debate going on in Europe in relation to the many challenges facing the Union and be in a position to submit new ideas and undertake initiatives. 


On the internal front the Report also underlines the need for a new tax reform based on low tax rates and strict penalties in cases of non-compliance. Particular importance is afforded to the promotion of a national energy policy. In relation to the broader fiscal and banking problems, it is preferable to avoid recourse to the European Bailout Mechanism.  However, if this is not possible, we must be prepared to make suggestions that would lessen the cost of adjustment.


The significance of substantive administrative reform that would enhance the effectiveness of the state is underlined. Also, restoring trust toward the state and its institutions is absolutely important.


In relation to the Cyprus Problem the need to submit a framework of guiding principles is paramount. The importance of an evolutionary approach and of the introduction of confidence building measures is also highlighted. Suggestions are also submitted for addressing the Turkish expansionary policies and for upgrading the position of the Republic of Cyprus in the regional, European and international environment. In this context Turkey should be convinced to implement the Ankara Protocol for Customs Union so that additional chapters of its accession negotiations with the EU would open. Regarding Turkish claims in relation to Cyprus’ Exclusive Economic Zone, there should be a joint appeal to the International Court of Justice at The Hague. 


The Republic of Cyprus is also called upon to elaborate at long last its own narrative. This will contribute significantly toward regaining the moral high ground and would help in the implementation of its broader objectives. A solid and clear narrative would also contribute in defusing the confusion that now prevails.


Taking into account the demographic changes that are taking place in Europe and elsewhere, the Republic of Cyprus should seriously consider the need for a holistic approach that would safeguard the cultural identity of the country while at the same time incorporating all legal immigrants within the context of a common value system. At the same time, it is absolutely critical to address the settlers in the Turkish occupied areas as a political issue.


The Republic of Cyprus is at a pivotal point. The status and standing of the country, its future prospects, the regaining of its territorial integrity, the completion of its independence and its place in the regional, European and international environment will depend on the choices it makes now.