Cyprus' accession to the EU: 10 years on

#CriticalThinking

Picture of Andreas Theophanous
Andreas Theophanous

President of the Cyprus Center for European and International Affairs, and Head of the Department of Politics and Governance at the University of Nicosia

When Cyprus applied for European Union membership in 1990, there where high expectations and great euphoria both in relation to the conflict between the Republic of Cyprus and Turkey over the occupied part of Cyprus (the Cyprus Question) and the socio-economic prospects of the country. As regards the Cyprus Question, the expectation was that the EU’s value system would aid its resolution. The process of harmonisation and eventual participation in the EU was also expected to promote the rationalisation of Cyprus’ socio-economic structure.

Cyprus aspired to become a key asset for its EU partners through its unique geo-strategic location. Yet ten years post-accession and six years after joining the Eurozone, there is a sense of deep disappointment in Cyprus about the EU and, unsurprisingly, growing Euroscepticism.

The decisions of the Eurogroup in March 2013 threw Cyprus into a very deep crisis

Towards the end of the previous decade, Cyprus began to face serious economic problems due to endogenous as well as exogenous factors. Instead of addressing these problems in a manner that would have paved the way for the rationalisation of our economic structure, the decisions of the Eurogroup in March 2013 threw Cyprus into a very deep crisis. What’s more, Cyprus was used by its partners as a guinea-pig, an experiment to test policies that could be potentially used for other crisis-stricken states and these decisions also entailed a punitive dimension.

There is no doubt that today the EU is in the midst of the greatest crisis in its history.  The debt crisis and the North-South divide, however, constitute only two dimensions of the problem. Perhaps the greatest challenge today is the EU’s loss of its raison d’etre. It is alarming that while questions of an EU democratic deficit continue to plague the union, the concept of European solidarity has been eroded and is no longer taken seriously.

These problems will inevitably influence the outcome of the forthcoming European Parliament elections.  EU stakeholders will have to deal not only with the likely rise of extremist political movements, but also the growing number of European citizens who will turn their back on the elections.

Perhaps the greatest challenge today is the EU’s loss of its raison d’etre

Cypriot voters, especially, have much cause to feel this way – and it’s important to understand why. A few years after the launch of the euro, the Eurozone found itself in serious trouble because of the international financial crisis. This was made worse by the fact that several southern European countries, like Cyprus, had major fiscal problems; so when their banking systems needed recapitalisation they were not in a position to respond. The fact that the Eurozone lacks built-in stabilisers and that its overall structure tends to enhance the economic downturn in the countries facing a recession was not of help.

Moreover, the Troika and its philosophy have raised intense debates in Europe, as well as bitter feelings among the public. In addition to its complete lack of legitimacy or accountability, its actions are completely inconsistent. When a particular country faces problems, the European Central Bank, the European Commission and the International Monetary Fund dictate the implementation of a particular package on the country. The packages vary both in content and harshness. In Cyprus’ case – being the pilot study for a new approach – it was particularly severe.

What has also been challenged is the philosophy of draconian measures and the shock therapy – a philosophy essentially defined by Germany’s ethical and institutional codes and standards. It is true that the economies of the south required fiscal rationalisation for quite a long time. Furthermore, the economic convergence of all members of the Eurozone required much effort. But the policies of the Troika had devastating effects on many countries, leading to a deepening of the divide between North and South as well as to social disintegration within southern countries. The harshness of the so-called stabilisation programmes have led to distrust of the economic rationale involved, with some circles even labelling it German economic imperialism.

The policies of the Troika had devastating effects on many countries, leading to a deepening of the divide between North and South as well as to social disintegration within southern countries

In the 1990s, Thatcher’s Britain was criticised for its perceived anti-European stance, given her refusal to accept the idea of a common European currency. In retrospect, her concerns were serious and legitimate. But we are already in too deep, and if we are to move forward – with both the Cypriot economic crisis and the broader European malaise – we must be pragmatic.

The Troika’s economic policies in Cyprus will not have a positive outcome but, on the contrary, are set to deepen the crisis on all fronts with multidimensional negative repercussions. According to The Economist, Cyprus’ standard of living has dropped by 13% since 2004, the year of its accession to the EU. To get out of this situation, Cyprus will of course have to think outside the box.  But on an EU-wide level, it must be realised that the growing divide between North and South, as well as the frustrated expectations of millions of Europeans, are undermining the European project. New thinking, economic rationality and social sensitivity will be required if these challenges are to be effectively addressed once and for all.

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