Hot spots: Cyprus. (International Insight).(Brief Article)

The Greek part of the divided island is an excellent place for doing business, with strong banks and with credit conditions and terms comparable to those in Western Europe. By comparison, the Turkish part is underdeveloped, even backward, and doing much worse economically. When and to what extent this "tale of two cities" will change under the influence of EU membership aspirations remains to be seen. By the time the self-imposed end-June deadline for agreement on the main points of a deal to end the Island's division had come and gone, the representatives of the Greek and Turkish Cypriot communities, Glafkos Clerides and Rauf Denktash, had met 45 times, twice a week (every Tuesday and Friday) for the better part of six months to find enough common ground. They had done so under the pressure of two factors they both were keenly aware of--the fact that President Clerides is preparing to retire when his term runs out in early 2003 and the approach of an important European Union summit conference in December thi s year, when Cyprus is expected to be one of ten candidates to have completed accession negotiations and to be ready to join the Union, perhaps as early as in 2004.

There has never been much disagreement about what the key issues are in the negotiations. They revolve around how both communities can be given maximum independence and authority under a weak central government, what territory is to be accorded to each camp, how disputed property is to be divvied up, what is to be done with the refugees on both sides, and how Turkish and Greek Cypriots are to be guaranteed security.

Denktash, the leader of the breakaway Turkish Republic of Northern Cyprus (which to this day is recognized only by Ankara), is still pushing for the principle of "two component states" in a confederation. This demand is unacceptable to President Clerides, who has staked his political reputation on resisting "creeping recognition" of Turkish Cyprus. The UN, in its proposal for a settlement, has been conceding the notion of Turkish troops remaining on the Island, but envisages only a loose federation of separate Greek and Turkish zones based on power sharing. The initial plan was to reach the outlines of a broad agreement by end-June in order to give all sides enough time to legally define and flesh out the pact before the EU's December summit.

There is still time for progress on some of the key issues between now and then. From an objective point of view, it would not be too difficult to give each of the two communities credible assurances that it will be secure and politically equal under a settlement. While reunification and the abolition of the dividing "Green Line" would not be without cost--it could amount to as much as 5 percent of the Island's gross domestic product--this would be largely offset by financial aid from the European Union and by the "peace dividend," i.e., the ability of both sides to reduce outlays on the armed forces. The real question is whether the government of Turkey is prepared to put pressure on Mr. Denktash to come to terms. It takes a nudge from Ankara to get the Turkish-Cypriot leader to bend. Considering that Turkey is headed for elections, the likelihood of such a nudge ...