22 Jan 2017 Where might Juncker’s €3.1bn come from?

The Cyprus News Agency (CNA) reported last week that European Commission President Jean-Claude Juncker said the Commission could allocate €3.1 billion to Cyprus in case of a solution and that this would be part of the Multiannual Financial Framework.

EU officials have not confirmed the figures. What we do know, however, is that the EU is not at liberty just to spend money as it likes. Funds will either have to come from existing programmes or from a special package that will need the separate assent of 28 member states.

Some of it could come from existing funds. Under the current 2014-20 period, the EU budget for Cyprus comes to €1.1bn (of which €246m will be co-financed by the government).

Three years into the seven-year programme, however, only €57m of those funds have been decided upon and €9.8m spent. Some of the €3.1bn, therefore, might simply come from the €1bn that has not yet been allocated.

An important source of funding could come from an adjustment to the way in which Cyprus is classified for funding purposes.

Classification matters because the funding levels vary depending on income levels in each ‘NUTS’ region. Whereas Greece attracts lots of funding by chopping itself up into dozens of smaller, poorer NUTS regions, Cyprus is classified as just one NUTS region. Even Malta has two.

Funding levels rise depending on GDP per capita at purchasing power standard (PPS) as a proportion of the EU total, in the period 2007-09. The highest funding goes to regions under 75%, the second-highest to 75%-90% and the lowest to those over 90%.

Although the financial crisis pushed Cyprus’ GDP per capita at PPS to 82% in 2015, in 2007-09,it averaged 105%. This means that, apart from some adjustments made after the crisis, Cyprus cannot even tap the second highest level of funding.

Split the NUTS regions into two or more regions after a settlement, however, and you should attract more.

In 2014, Turkish Cypriot incomes were only 47% of Greek Cypriot incomes (before adjusting for PPS). This is close to the ratio in 2009, when I co-authored the PRIO “Day After II” report. Back then, I calculated that, adjusted for PPS, Turkish Cypriot incomes were roughly 66% of Greek Cypriot incomes.

Today, that means Turkish Cypriot incomes would be only 54% of EU28 incomes at PPS and therefore eligible for the highest funding.

Working out how much money that might translate into is a task that would take me over my deadline. But, to give you a rough idea, I calculated in 2009 that it could generate an additional €600m in EU funds.

Together with the abovementioned unspent amount, that brings us to around €1.6bn. Some more could come from the Commission’s “Instrument Contributing to Stability and Peace”, although it is mainly focused on non-EU countries.

The rest, it seems, would have to come from a special peace package. The latest figures on the Northern Ireland Peace Package show €1.3bn was spent over an 18-year period from 1995 to 2013.