24 Jun 2016 Turkish Cypriots need budgetary independence

Turkish Cypriots took to the streets last week to protest against the establishment of a Youth and Sports Coordination Office, which it seems will be run by officials from Turkey. As the Cyprus Weekly has been reporting, there is concern that the establishment of this office is the beginning of cultural “assimilation” by those who are more socially conservative and religious than the average Turkish Cypriot. It is also being read in some quarters as preparations for an annexation of northern Cyprus by Turkey if the Cyprus problem is not solved in the coming months.

The new office came as part of the financial protocol: the agreement which the Turkish Cypriots sign with Turkey every three years and which includes the grants and loans which Turkey subsidises the northern Cypriot economy.

A late draft of the protocol for 2016-18 shows total Turkish support at TL 4.2 billion (€1.3 billion) for the period 2016-18, or about €424m per year on average. Of the TL 4.2bn total, just under half is for budgetary support, while just over half is in the form of loans for infrastructure improvements.

The budget for 2016-18 is rather higher than in 2013-15, when the Turkish government spent TL 2.8bn (€862m at today’s exchange rates).

I do not speak Turkish, but the Google-translated text in the first few pages makes it clear that Turkey wants to see “a comprehensive reform programme”, and wants the Turkish Cypriots to “stand on their own two feet”. The targets include privatisation of electricity and the ports.

The protocol includes a whole raft of tables and targets that reminded me of the Republic of Cyprus bailout programme commitments, or earlier report pledges to the European Commission when the country was preparing for EU accession.


Independence good for a united Cyprus

If the long-term aim is financial independence from Turkey, then that can only be a good thing.

At the moment, Turkish Cypriots have little leeway with Turkey. If Turkey wants a Youth and Culture Office, there is little those in power can do to stop it, given that they depend on Turkey to pay wages and salaries.

However, if the tax system helped rather than hindered private enterprise, if the public servants did not enjoy enviable salaries and perks, then revenue could match expenditure and Turkish Cypriots would be on firmer ground the next time the Turkey demanded something they did not like.

The same goes for relations with Greek Cypriots in a future united federal Cyprus. The traditional theory of federal models is that the richer part should subsidise the poorer part to stop them breaking away.

However, times have changed. Look at the troubles of the eurozone and the arguments about EU budget in the run-up to the UK referendum: it is clear that taxpayers today deeply resent subsidising others.

If you can pay your own way, on the other hand, you get a lot more respect. Achieving financial independence could therefore bring an enormous boost to Turkish Cypriot confidence and help cement a united Cyprus in the process.