Europe
2:48 pm
Tue November 27, 2012

For Cyprus' North And South, A Reversal Of Fortunes

Originally published on Wed November 28, 2012 3:05 pm

Just a few years ago, Cyprus was considered a wealthy country, though that referred mostly to the Greek Cypriots on the southern part of the divided island. When Cyprus entered the eurozone in 2008, analysts were wondering what would become of the much poorer north, which has been occupied by Turkey since a 1974 war.

Now, the Turks in northern Cyprus have the booming economy, while Greek Cypriots, crippled by exposure to ailing Greek banks, are waiting for final approval on what will be the fourth sovereign bailout of a eurozone country.

After Turkey invaded Cyprus nearly four decades ago, Greek Cypriot families in the north fled their homes and relocated in the south — which is now an independent nation in the European Union.

Turkish Cypriots went to the north, which Turkey continues to occupy. Because of embargoes and isolation, Turkish Cypriots were cut off from the rest of the world and became dependent on aid from Turkey.

Fikri Toros saw his family lose their undergarment factory. They now import home furnishings, but for years, a weak Turkish economy hurt the company.

"One of the biggest challenges was to deal with the high inflation, very high interest rates and use of the Turkish lira in general," Toros says.

Decades Of Friction

In 2003, the border dividing the island opened. Turkish Cypriots hoped they could partner with the flourishing south — and Europe.

But Greek Cypriots rejected a unification plan by then-U.N. Secretary-General Kofi Annan and joined the European Union in 2004 without the Turkish Cypriots.

Ergun Olgun, a former adviser to the Turkish Cypriot government, says that killed incentive to work together.

"The European Union destroyed the basis for the two sides to reach the kind of sustainable agreement," says Olgun, "because there is no need for Greek Cypriots to share their power with the Turkish Cypriots at this time."

The divisions and dependencies deepened. The Greek Cypriots adopted the euro in 2008. But by then, the Turkish lira was strong, says Ersin Tatar, the Turkish Cypriot finance minister.

"Turkey's much stronger, and because Turkey's stronger, that strength is reflected in north Cyprus," he says. "We have more Turkish tourists, more Turkish companies, Turkish commercial flights. Turkey is opening us up to the world."

Just 300,000 people live in the northern part of Cyprus. The Turkish Cypriot economy has grown by 5 percent annually in recent years, partly, Tatar says, because of an education industry financed by Turkey.

"Our universities now number about six, and two more are being built with support from Turkey," he says. "We have about 50,000 students. About 30,000 students are from Turkey, but we have a growing number from Iran, Azerbaijan and African countries."

Many sign up at Near East University, which has campus mosques and a fast-growing Islamic Studies program. That's where Hayrettin Gunaydin, who's also from Turkey, teaches. He says many Turkish professors are also arriving to teach Arabic and Turkish history.

Greek Cypriot Economy Suffers

There's a checkpoint to enter the south, where another 800,000 people live in the Republic of Cyprus, nearly all of them Greek Cypriots.

The cities there have malls, villas and sleek office buildings. Paris Dimitriades, who likes hanging out in the trendy cafes and restaurants of Limassol, Cyprus' second-largest city, says he still can't believe the economy is tanking.

"Cyprus had a prosperous economy," says Dimitriades, who works for the EU presidency, which Cyprus currently holds. "It was like one of the most prosperous economies in the EU. That was not an exaggeration."

One reason is because low tax rates attracted foreign investment, says economist Costas Apostolides.

"There are $22 billion deposited in our banks in Cyprus, primarily from Russia and the Ukraine," he says.

That amount is nearly equivalent to the country's entire GDP. Great Britain, Iran, Israel and China also invest in the island, he says.

Trade relations between the Cypriots and Russians date to Soviet times. Current President Demetris Christofias, the only communist president of an EU nation, was educated in the Soviet Union, speaks Russian fluently and likes to call himself the "red sheep" of Europe.

But Russia's presence is most felt in Limassol, a port city that has Russian restaurants and Russian pop music, a monument to poet Aleksandr Pushkin and city signs in Russia's Cyrillic alphabet.

Marina Snigireva, who's from Moscow, has lived in Limassol for eight years. She works for one of the many Russian offshore companies in Cyprus and says many of them employ Greek Cypriots.

"Imagine if one day Russian business disappeared from here," she says, looking downcast. "I guess it would be a very big tragedy for Cypriots as well."

She says she's also anxiously awaiting the details of the bailout, and how it will affect her business and adopted country.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

ROBERT SIEGEL, HOST:

The tiny Mediterranean island nation of Cyprus is awaiting final approval for the latest eurozone bailout. Cyprus has been divided since 1974. The south is a sovereign nation that's part of the eurozone, but the north is supported by Turkey.

And as Joanna Kakissis reports, that has created a strange split in Cyprus. As the euro debt crisis deepens and the economy in the south falters, Turkey's economy is booming and the north of Cyprus with it.

JOANNA KAKISSIS, BYLINE: After Turkey invaded Cyprus in 1974, Greek Cypriot families were forced to flee their homes and relocate to the south, which is now an independent nation in the European Union. Turkish Cypriots went to the north, which Turkey occupied. Because of embargoes, they became dependent on Turkey. Fikri Toros watched as his family's undergarment factory was forced to close. They now import home furnishings, but for years, a weak Turkish economy hurt the company.

FIKRI TOROS: One of the biggest challenges was to deal with the high inflation, very high interest rates and use of the Turkish lira in general.

KAKISSIS: In 2003, the border dividing the island opened. Turkish Cypriots hoped they could partner with the flourishing south and Europe. But Greek Cypriots rejected unification and joined the E.U. without the Turkish Cypriots, says analyst, Ergun Olgun.

ERGUN OLGUN: The European Union destroyed the basis for the two sides to reach the kind of sustainable agreement because there is no need for Greek Cypriots to share their power with the Turkish Cypriots at this time.

KAKISSIS: The divisions and dependencies deepened. The Greek Cypriots adopted the euro in 2008. By then, the Turkish lira was strong, says Ersin Tatar, the Turkish Cypriot finance minister.

ERSIN TATAR: Turkey's now much stronger, and because Turkey's stronger, that strength is reflecting in north Cyprus.

KAKISSIS: The Turkish Cypriot economy has grown by 5 percent annually in recent years, he says, thanks in part to an education industry financed by Turkey.

TATAR: Our universities now number about six. We have about 50,000 students.

KAKISSIS: Just 300,000 people live in north Cyprus. Most college students are Turkish, Tatar says. Many sign up at Near East University. That's where Hayrettin Gunaydin teaches.

HAYRETTIN GUNAYDIN: (Speaking foreign language)

KAKISSIS: Gunaydin, who's also from Turkey, says many Turkish professors are arriving to teach Arabic, Koran studies and Turkish history. There's a checkpoint to enter the south, another 800,000 people live here, nearly all of them Greek Cypriots. The cities have malls, villas and sleek office buildings. Paris Dimitriades is at a trendy cafe and he says he can't believe the economy is tanking.

PARIS DIMITRIADES: Cyprus had a prosperous economy. It was like one of the most prosperous economies in the EU. That was not an exaggeration.

KAKISSIS: That's because low tax rates attracted foreign investment, says economist Costas Apostolides.

COSTAS APOSTOLIDES: There are $22 billion deposited in our banks in Cyprus, primarily from Russia, the Ukraine.

KAKISSIS: Russians have invested in Cyprus for years. The port city of Limassol has Russian restaurants, a monument to Aleksandr Pushkin and city signs in Cyrillic. Marina Snigireva works for one of the many Russian offshore companies here.

MARINA SNIGIREVA: We give a lot of, how to say, working places, you know, for Cyprus as well, which is good for them because imagine if one day Russian business disappeared from here. I guess it would be a very big tragedy for Cypriots as well.

KAKISSIS: The bailout is expected next month. For NPR News, I'm Joanna Kakissis. Transcript provided by NPR, Copyright NPR.