1621 June 2012

SPECIAL REPORTThe Cypriot presidency of the EU

The contours of Cyprus’spresidency may be signifi-cantly adjusted just days be-fore the presidency starts,when EU leaders meet inBrussels on 28-29 June.

The Cypriots are painfullyaware that the eurozone debtcrisis is in flux. Its own econ-omy – otherwise largely de-tached from Greece – is beingdragged down by Cypriotbanks’ exposure to Greece.And the eurozone’s troublesare not contained. “Two sym-bols of the EU itself are underthreat – the euro and theSchengen zone,” says a presi-dency spokesman, going onto argue that the economiccrisis and the accompanyingerosion of trust are encourag-ing proponents of limits onborder-free travel and rein-forcing opposition to sharingthe burden of coping with il-legal migration, an importantconcern for Cyprus and otherMediterranean states.

The Cypriot analysis is that“90% to 95% of the presiden-cy will be economic”, which iswhy the presidency hasbrought more civil servants toBrussels from the financeministry in Nicosia than fromthe foreign ministry. One ofthese officials’ tasks will be toprepare meetings of financeministers, which the presi-dency argues will be easier forCyprus than it was for theprevious three presidencies –Denmark, Hungary andPoland – because Cyprus is amember of the eurozone.

The other daunting chal-lenge is negotiations on theEU’s spending for 2014-20,the multiannual financialframework.

The long-term budgettouches on every issue. “It is alitmus paper,” says a diplomatfrom another member state,and “without a good narrativeon that, they will have lost”. Ifso, a small country might be

fated to lose. But the defini-tion of loss and victory is notwhether Cyprus gets its way.Rather, says another diplo-mat, from a previous presi-dency, success means provingto other member states that ithas done everything it can –showing that, if a deal is elu-sive, it is because of nationalcapitals.

Technical issuesThe Polish presidency in thesecond half of 2011 did “a verygood job of clearing technicalissues”, he says. Denmark hasbeen trying to push talksahead as far as possible with-out putting numbers on thetable. The task that facesCyprus is to harness the “very,very strong need to agree”positions and to communi-cate well enough to ensurethe political ground is wellprepared for a deal.

Cyprus’s own position em-phasises solidarity. It is one ofthe 15 members of theFriends of the Cohesion Poli-cy trying to protect the policyfrom cuts by the largest con-tributors – an affiliation thatdemonstrates that an honest

broker does not mean being aneutral broker.

On some of the other bigitems for the EU – includingthe Common AgriculturalPolicy – it will not have muchinfluence, but Cyprus’s envi-ronmental agenda has prior-ities that are attainable –agreements on trans-Euro-pean networks, on monitor-ing greenhouse-gas emis-sions, on water use, and asuccessor to the LIFE+ envi-ronment fund.

Agreement on these issueswould offer some consolationif its own national priority – torevive the notion of an inte-grated EU maritime policy –proves too much of a chal-lenge (see article overleaf).

Syrian concernsSyria is the likeliest externalsource of difficulties for thepresidency. Cyprus’s proxim-ity to the Middle East will un-doubtedly make it sensitive todevelopments in the regionand, if foreign-policy initia-tives emerge during the pres-idency, they might well relateto that region. Cyprus likes totalk up its friendly relations

Cyprus starts out on its pres-idency of the EuropeanUnion’s Council of Ministersknowing that expectationsare low and apprehension ishigh. The intractable divisionof its Greek south and Turk-ish north has made Cyprus asynonym for division. Thispresidency will be adminis-tered only by the GreekCypriot government, whichrules over a population of just800,000. The permanentrepresentation to the EUnormally numbers just 80people.

Even in ordinary times,these handicaps would makethe presidency a challenge.But these are not the best oftimes: the eurozone is in cri-sis, neighbouring Greece isin turmoil and, just half aday’s boat trip away, Syria isin flames.

That need not doomCyprus’s presidency from theoutset. Other presidencieshave also had ill-starredstarts. Within days of assum-ing the presidency in 2011,Hungary was caught in a po-litical storm about its medialaw, which continued tothunder, yet the presidencywas generally praised as ef-

fective. Hungary’s PrimeMinister Victor Orbán fo-cused on his domestic inter-ests, and treated the presi-dency as a responsibility to beleft largely in the hands of thecivil service.

The government says theCypriot presidency (orCyprus presidency, as it in-sists on calling it, in anothersign of community sensitivi-ties) is an opportunity – butfor self-transformation andmodernisation, rather thanself-projection. The govern-

ment points out that it hasjust one national priority, anintegrated maritime strategy(see opposite page). The restof its agenda is inherited, andits approach to the agenda isto be an honest broker.

An honest brokerFor a country of its size andeconomic structure, the roleof honest broker comes nat-urally. The Cypriot popula-tion depends on services,rather than on money fromthe EU’s Common Agricul-

tural or Fisheries Policies.Cyprus contributes morethan it receives from the EU’sbudget, which, politically,should make it easier toachieve its aim of champi-oning solidarity. It claims tobe a small country with fewirons in the fire.

But the one big iron thatremains has caused manyproblems. The division of theisland has retarded progressin the EU’s relationship withTurkey, complicated the EU’ssecurity ties with NATO, and

caused Cyprus not to recog-nise Kosovo as a state. It evencontributes to the closenessof Cyprus’s relationship withRussia, which may this sum-mer save it from an EU andInternational MonetaryFund bail-out. The success ofthe presidency may dependon whether the issue ofTurkey can be anaesthetisedfor the duration of the presi-dency.

Cyprus itself does not in-tend to raise issues related toTurkey. Turkey has said that

it will boycott the presidencyin its entirety. The TurkishCypriots are largely ignoringthe presidency. But the dan-ger remains that Cyprus’snon-relations with Turkeywill surface as a problem.

Any presidency’s inten-tions can be blown off courseby unexpected challenges.And Cyprus’s aspirations tobe an honest broker wouldmean little if it lacks the staffto broker deals. For Cyprus,the challenge is all the greaterbecause it is, geographically,the most remote presidencythat there has ever been.

The national air carrier hasresponded by setting up sixdirect flights a week fromNicosia to Brussels for theduration of the presidency,but the main decision hasbeen to make this a Brussels-based presidency. Informalministerial meetings will beheld in a conference centre inNicosia, newly revamped forthe presidency, but almost allother meetings will be held inBrussels. The permanentrepresentation in Brusselshas been swollen to 230 peo-ple for a year, by re-deployingcivil servants who normallywork in Nicosia.

This mobilisation, whichincludes the creation of a postof minister of EU affairsspecifically for the presiden-cy, is a mark of an adminis-tration that is being stretchedby its responsibility to theEU. Unsurprisingly, then, thepresidency is limiting its ownambitions.

Low expectations mayhave a benefit for the presi-dency: it leaves room for wel-come surprises.

Times are diffi-cult, but successis not beyondCyprus’s reach asit takes over thepresidency of theEU, writes Andrew Gardner

Cyprus lies in a difficult neighbourhood; Syria’s and Lebanon’s portslie half a day’s boat trip away, and Turkey, its nearest neighbour, is themain transit country for migrants seeking to reach the EU. That iswhy Cyprus worries about migration, especially illegal migration.

On a visit to Malta earlier this month, Demetris Christofias, thepresident of Cyprus, said that the two Mediterranean islands had“common worries and interests” over irregular immigration. “We’renot racists but we must defend the rights of our countries,” he said.Amnesty International, an advocacy group, said this month thatCyprus detained too many asylum-seekers and other migrants, oftenin poor conditions, and pointed out various deficiencies in its laws.The figures are low; but Cyprus feels vulnerable to the vagaries of migration flows.

This exposure could make it difficult for Cyprus to act, or be perceived, as an honest broker in the complex negotiations currentlyunder way between member states, and between member states andthe European Parliament, on the various elements of the Common European Asylum System, which is supposed to be launched by theend of the year.

MIGRATION AND ASYLUM

The euro and the Schengen area aredaunting challenges for the Cypriots,writes Andrew Gardner

Money worries and border battles

Right place, wrong time?

Another issue that will land in Cyprus’s lap is the EU’s Schengen areaof borderless travel. The European Parliament last week suspendedco-operation on justice and home-affairs matters with Denmark, thecurrent holder of the rotating presidency, because of a decision bymember states to change the legal basis of a proposal for revisedrules on Schengen, in effect excluding MEPs from decision-making.Cyprus has so far escaped MEPs’ censure, but that may change onceit falls to Cypriot diplomats to represent the Council’s view in talkswith the Parliament.

The Dutch government is expected to drop its opposition to Bulgar-ia’s and Romania’s membership of the Schengen area following theDutch parliamentary election in September. That would leave Cyprusas the only country in the EU apart from the UK and Ireland that remains outside the Schengen area, because the recognised government does not control the entire territory of the island.

SCHENGEN

with both the Arab world andIsrael, and it has during theLibyan crisis, like Hungary,

kept its embassy in Tripoliopen. These six months maytest the value of those ties.

ARCHIVE

1721 June 2012THE CYPRIOT PRESIDENCY OF THE EU

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The last presidential electionin Cyprus, on 17 February2008, produced a surprise:the incumbent, the right-wing nationalist Tassos Pa-padopoulos from the Demo-cratic Party (DIKO) failed towin enough votes to proceedto the second round, held oneweek later. He was beaten byIoannis Kasoulides from thecentre-right Democratic Ral-ly (DISY), with 33.5% of thevote against Papadopoulos’s31.8%.

Kasoulides had cam-paigned in favour of a UnitedNations settlement plan in2004, Papadopoulos hadbeen against it. The plan,named after the UN secre-tary-general of the time, KofiAnnan, was rejected by theGreek Cypriots in a referen-dum just days before Cyprusjoined the EU. But Ka-soulides was fewer than1,000 votes ahead ofDemetris Christofias, thecandidate of the Communist

AKEL, who came second. Inthe week that separated thetwo rounds, DIKO swung itssupport behind Christofias,who won the presidency with53.4% to Kasoulides’s 46.6%.

The episode illustrates apoint made by James Ker-Lindsay, a research fellow atthe European Institute of theLondon School of Economicsand Political Science. “Eventhough Cyprus has a presi-dential system, politics is allabout coalitions,” he says. “TheCypriot president has morepower than any other Euro-pean leader, but in order to getelected he needs to strike dealswith other parties.”

Christofias’s alliance with

DIKO – which opposes ac-commodation with the Turk-ish Cypriot community –ended up impeding the newpresident’s ability to strike adeal in the reunification talks,which he launched within amonth of his victory.

Following DIKO’s depar-ture from the ruling coalitionlast year, after a blast at a navybase knocked out more than half of the republic’spower-generation capacity,Christofias now heads a mi-nority government that in-cludes several technocrats.But until his term in officeends in February, Christofiasand his government are se-cure.

EU officials will be relievedthat the Czech scenario, of a government collapsinghalfway through its turn atthe helm of the EU’s Councilof Ministers, is unlikely to berepeated. In any case, it is lessof a problem for a Cypriotgovernment to lack a parlia-mentary majority than itwould be in other memberstates. “Patronage and lever-age is far more importantthan legislative work,” saysKer-Lindsay. The ability tohand out jobs depends on being in power, not on beingeffective in power.

No frontrunnerWhat might emerge fromFebruary’s presidential elec-tion is unclear. “The race iswide open,” says Hugh Pope,a researcher on Cyprus andTurkey in Istanbul with the

International Crisis Group, athink-tank. AKEL has not yetchosen a candidate and isnon-committal about a possi-ble alliance with DIKO.

DISY, the moderate, cen-tre-right opposition party, willsend Nicos Anastassiades, itsleader, into the race. Pope de-scribes Anastassiades as “a lit-tle untested”, but says that hehas “one of the most positiveapproaches to the Cyprusproblem”. “He was braveenough to say ‘Yes’ and cam-paign for the Annan plan in2004,” Pope says.

But the shift in voters’ at-tention from the island’s divi-sion to the parlous state of itseconomy has created a newdynamic in domestic politicsin Cyprus. How this mightplay out next February willbecome clearer during thenext six months.

An island of alliances and divisions

Back fromthe depthsIn 2007, the Portuguesepresidency of the Council ofMinisters spearheaded an‘integrated maritime policy’that contained a great manypromises. The packed actionplan promised to establish anetwork of “motorways ofthe sea” throughout Europe,eliminate illegal fishing, andmitigate the effects of cli-mate change on coasts.

Five years later, and thereis no integrated maritimestrategy. “There was a lot ofdiscussion...but since thenwe have not heard muchabout it,” said Eleni Mari-anou, secretary-general ofthe Conference of Peripher-al Maritime Regions.

Cyprus, as a maritime island state, says reviving thepolicy is one of the maingoals of its period at the headof the EU. In October, an in-formal ministerial confer-ence will be held in Limassol with the aim ofproducing a ‘Limassol decla-ration’ that sets out the pri-orities for action.

Earlier this month,Efthemios Flourentzou,Cyprus’s minister for com-munications and works, said the declaration wouldmark “a new drive for thefurther development andimplementation of this in-novative, cross-cutting policy”.

Progress reportThe European Commissionis expected to present aprogress report on the inte-grated maritime policy atthe October conference,which will be attended byMaria Damanaki, the Euro-pean commissioner for fish-eries and maritime affairs,and José Manuel Barroso,the president of the Com-mission.

The declaration will notcontain  plans, dates or dead-lines. But it will indicate pol-icy areas that need to bestrengthened and ways inwhich maritime policies canbe better linked.

The Cypriot governmenthopes that this push for anintegrated policy will lastlonger than its predecessor.

Dave Keating

The Cypriot president will not contestthe next election, and it is unclear whohis successor will be, writes Toby Vogel

1821 June 2012 THE CYPRIOT PRESIDENCY OF THE EU

Cyprus’s movers and shakers

ERATO KOZAKOU-MARCOULLISForeign minister

Given the vagaries of ministerial appointments inCyprus – horse-trading can sometimes hamperthe island’s international agenda – many inCyprus were reassured when Erato Kozakou-Marcoullis, an experienced career diplomat, wasput in charge of the foreign ministry in August2011. Kozakou-Marcoullis, 63, had been ministerof communications and works since March 2010,having served as foreign minister for sevenmonths under Tassos Papadopoulos, Christofias’s predecessor as president.

Kozakou-Marcoullis has a reputation for hard work and is very ready to give face-to-face interviews to explain the complexities of the divided island – the primary task of any Cypriotforeign minister. She is also proud of her heritage and traditions, on one occasion donning national dress to meet former US president Bill Clinton in Washington, DC.

After gaining two law degrees in Athens, in 1979 Kozakou-Marcoullis completed a PhD in so-ciology and political science at the University of Helsinki. When her husband took a job inmedical research in New York, she became part of the permanent mission of Cyprus to theUnited Nations from 1980 to 1988.

From 1996 to 1998, she served as ambassador to Sweden, with responsibility for the otherNordic countries and the three Baltic states. She spent the next five years as ambassador tothe United States, and was also Cyprus’s link to to the World Bank, the International MonetaryFund, the International Civil Aviation Organization and the Organization of American States.Later, while serving as a director at the foreign ministry in Nicosia, she was ambassador toLebanon and Jordan.

As well as representing Cyprus at international bodies, Kozakou-Marcoullis has published academic studies, and lectured in universities and to think-tanks worldwide.

Charles Charalambous

ELENI MAVROUInterior minister

Eleni Mavrou is an exception in Cypriot politics.She is well-grounded in the local left-wing tradition, which at national level tends tofavour male politicians with largely predictableprofiles and performances to match. But shealso fits easily into the familiar European leftistmould: a successful female politician who is articulate in more than one language and regarded as accessible, hard-working anddown-to-earth.

Her appointment in March as the country’s

first female interior minister was the latestmilestone in a lengthy political career that includes five years as the first female mayor ofthe capital, Nicosia.

When she began her term as mayor in 2006,Mavrou emphasised that while tackling themajor challenges – modernising infrastructure,reviving the city’s historic centre, restructuringcouncil services, cutting bureaucracy, gettingaccess to European funding – she would aim to encourage greater participation by citizens insocial and cultural affairs. In particular, shethought her success would encourage morewomen to become involved in politics.

She was not, however, an overnight success.Mavrou, 51, has been politically active since herstudent days, when she studied for a degree inpolitics and international relations at the Uni-versity of London. Already a member of thecentral committee of the Progressive Party ofWorking People (AKEL), with responsibility forlocal government, she served two terms as aNicosia municipal councillor in 1986-96.

In 2001, she was elected as an MP forNicosia, and from 2003 also served as an observer at the European Parliament. But afterbeing re-elected as an MP she stood for mayorof Nicosia, regarding it as a bigger challenge

because she could have a direct impact onpeople’s lives. It will be interesting to see howshe applies her experience to her wide-rangingduties as interior minister.

Charles Charalambous

DEMETRIS CHRISTOFIASPresidentDemetris Christofias, the president of the Republic of Cyprus, has always stood out among European leaders. He is theonly Communist in a group dominated by the centre-right; he is the only president in the EU to head his country’s government; and he is one of just two presidents to hold real executive power (the other is the president of France).

But, last month, Christofias announced that he would not seek re-election next February, when his current five-year termends. The political career of the 66-year-old appears to be over, and he will leave the public stage a much-diminished figure. The Progressive Party for the Working People (AKEL), of which Christofias has been a member since the age of 18,has yet to choose a successor.

When Christofias was elected president early in 2008, hopes were high that he might be the man to bring about the reunification of the island and reconciliation between its Greek and Turkish communities. Not since Turkey’s invasion andoccupation of around one-third of the island in 1974 – in response to a coup attempt hatched by the military junta thatthen ruled Athens, and aimed at uniting Cyprus with Greece – had the conditions appeared so conducive to a settlement.

Barely one month after his election, Christofias launched settlement talks with Mehmet Ali Talat, the centre-left leaderof the Turkish-Cypriot community. But four years of negotiations have failed to break the deadlock, leaving Christofias,who had made achieving a settlement the prime objective of his presidency, with very little to show for his period in office.

Talat was voted out as leader of the Turkish Cypriots in 2010, to be replaced by Dervis Eroglu, a far less conciliatory figure from the centre-right. Christofias’s coalition with the centre-right Democratic Party (DIKO), which rejects accom-modation with the Turkish Cypriots, was a further complication. A deadly explosion at an ammunition dump last summer– for which the government was held responsible – prompted the DIKO to drop out of the coalition, forcing Christofias toform a largely technocratic government that lacks a strong majority in parliament.

The dire state of Cyprus’s economy, with its massive exposure to Greek debt, has now replaced the division of the island as the dominant political issue. Christofias’s main legacy might well be that Greek Cypriot politics has taken a steptowards normality, and away from a transfixing obsession with the problem of Turkey’s occupation.

Toby Vogel

VASSOS SHIARLYFinance minister

The man who will occupy arguably the hottestseat during the Cyprus presidency is a respectedbanker rather than a politician. Appointed financeminister just three months ago, Vassos Shiarly isthe third person to hold the post in just over fouryears, following his predecessor’s resignation aftersix months, for health reasons.

Christofias has not been the ideal boss for finance ministers; he has habit of publicly dis-agreeing with or even disowning measures to reduce the budget deficit.

Shiarly, 64, will have to draw on all his experience to negotiate the challenges of the next six months. First there is overseeing the negotiations on the 2014-20 multiannual financialframework. Then – unless Cyprus finds a bilateral lender (a €4 billion loan by Russia is beingtalked about) – it is likely that he will be chairing meetings of finance ministers while the Eurogroup of eurozone finance ministers considers a request from Cyprus for an internationalbail-out.

Shiarly is widely regarded as having the tools to succeed: a hard worker who achieves his aims quietly and with determination, someone who considers his words carefully. After 18 yearsin accounting in the United Kingdom, he left a senior position with Coopers & Lybrand to returnto Cyprus in 1985, where he joined the Bank of Cyprus, rising to group chief general manager in2010.

He has already set an example when it comes to cutting costs – after waiving his minister’ssalary, Shiarly travelled economy class on a recent trip to Malta with Christofias. The crucial question is whether he will be allowed to deliver the budget cuts that have been promised.

Charles Charalambous

THE CYPRIOT PRESIDENCY OF THE EU 1921 June 2012

ANDREAS MAVROYIANNISDeputy minister for European affairs

When the preparations for the EU presidency became mired in controversy and accusations ofnepotism in October 2011, the man chosen byChristofias to get things back on track seemedideal for the job.

At that point, career diplomat Mavroyiannis, 55, had spent three years in Brussels as Cyprus’sambassador and permanent representative to the European Union, and so was very familiarwith the European approach to consensus-building and problem-solving, and in particular withthe challenges associated with the presidency of the Council of Ministers.

In contrast to the bombast, short-termism and opportunism that often characterise domestic politics in Cyprus, the presidency will require political vision and leadership on awider scale, something that Mavroyiannis is well aware of. It will also demand coherence andconsistency in acting on behalf of the Council with other institutions. Another cultural challenge – in political terms – will be to deal with the massive organisational demands in atimely and effective way. Mavroyiannis appears to have the skills and experience. After a briefacademic career in law – he obtained his postgraduate qualification and doctorate in France –he joined the Cypriot diplomatic service in 1987. Since then, he has served as ambassador toIreland (1997-99), France (1999-2002) and the UN (2003-8), and in various other foreign min-istry posts. Drawing on his time as an expert on EU affairs at the Civil Service College of Lon-don (1994), the soft-spoken Mavroyiannis has been putting senior civil servants through acrash-course in EU affairs. His task was made harder by the reshuffling of three of the 11 minis-terial posts in March, but despite such setbacks, he is satisfied that his team is more confidentand prepared for the task in hand than last October.

Charles Charalambous

General affairs: Andreas MavroyiannisEconomic and financial affairs: Vassos ShiarlyJustice and home affairs: Eleni Mavrou (home affairs),

Loucas Louca (justice and public order)

Employment and social affairs: Sotiroula CharalambousHealth: Stavros MalasScience and research: Stavros MalasAgriculture and fisheries: Sofoclis AletrarisEnvironment: Sofoclis AletrarisEducation, culture and sport: Giorgos DemosthenousTransport, telecommunications: Efthymios FlourentzouEnergy: Neoklis SylikiotisCompetitiveness, internal market: Neoklis Sylikiotis

WHO CHAIRS WHICH COUNCIL5-6 July: European Commission visits Cyprus7-8 July: Informal meeting of environmentministers7-8 September: Informal meeting of foreignministers14-15 September: Informal meeting of finance ministers18-19 October: European Council meets,Brussels26 November-7 December: UN summit onclimate change, Doha, Qatar13-14 December: European Council meets,BrusselsA draft calendar has been posted on the temporary website: www.cy2012eu.gov.cy The presidency website, cy2012.eu, is to golive this week.

IMPORTANT DATES

KORNELIOS KORNELIOUPermanent representative to the EU

Cyprus’s preparations for its presidency of theCouncil of Ministers began badly. The head of theEU secretariat in Nicosia, Andreas Moleskis, resigned in mid-2011 amid complaints about nepo-tism in recruitment practices. There was a three-month hiatus before a successor was appointed,Andreas Mavroyiannis, who was Cyprus’s perma-nent representative to the EU. In turn, that left a significant vacancy in Brussels, which was filled bythe appointment of Kornelios Korneliou, who took over in October.

The 48-year-old Korneliou has sufficient experience to steady the boat. He was Cyprus’sdeputy ambassador to the EU between 2000 and 2007 – and has spent years in some of themost senior positions in Cypriot diplomacy, including ambassadorships in Paris (from where hewas re-assigned to his current post) and Vienna, a position that also involved representingCyprus’s interests to the Organisation for Security and Co-operation in Europe and the UN’s organisations. He was also, in 2008-10, the chief of staff of the then foreign minister MarkosKyprianou, who had previously served as Cyprus’s first European commissioner.

Korneliou is said to be good with staff, an asset that is particularly important since his team hasbeen almost quadrupled for the duration of the presidency. Another challenge will be managingrelations with other member states, but he can already boast familiarity with Germany. He wasfor five years a political-science student in Munich (where he wrote a thesis on the impact of EUmembership on Greece) and spent five of his early years in diplomacy in Berlin.

Andrew Gardner

NEOKLIS SYLIKIOTISCommerce, industry and tourism minister

After it was confirmed early this year that Cypruswas sitting on substantial offshore reserves of natu-ral gas, few were surprised when Neoklis Sylikiotiswas moved from the interior ministry to manage aprocess that will play a crucial role in determiningCyprus’s economic future.

Seen as a safe pair of hands by Christofias, Sylikiotis has been a committed member of the ruling AKEL party since his student days in the mid-1980s, holding a range of party positions. The minister is acknowledged, even by his political opponents, as someone who gets the job done. He has a reputation for working hard – some jokingly say that he never sleeps – and for being strong-willed and, occasionally, “a bit intense”.

Sylikiotis, 53, is one of only two ministers to survive from the first cabinet appointed byChristofias in February 2008, having served as interior minister for ten months in the previouscoalition government. During his time in charge of the interior portfolio, Sylikiotis backed a rangeof policies that tackled overly-bureaucratic government processes, including a radical reform oflocal government and legislation to untangle the town-planning process. He also earned the respect of his European peers for work on the Common European Asylum System and migrationpolicy along the EU’s Mediterranean borders. Sylikiotis’s commitment to the plight of asylum-seekers is rooted in his own past. He has talked openly about the xenophobia he encountered asa mechanical engineering student in Germany. In 2007, having resigned from the cabinet whenAKEL left the government coalition, he attended a demonstration in support of asylum-seekers –this at a time when Cypriots very rarely took the streets.

Charles Charalambous

SOTIROULA CHARALAMBOUSLabour and social insurance minister

Sometimes, the measure of a government minister’s success is an absence of newspaperheadlines. That was the case until recently forSotiroula Charalambous, but with the Cypriot econ-omy suffering, it is likely to change.A political sciences graduate of the Sofia Academy

of Social Science and Social Administration, a former official for the PEO, a trades union federa-tion linked to the left-wing ruling party, and an MPsince 2001, Charalambous’s approach to carrying out her duties as labour minister has held noideological surprises in terms of dealing with the social partners.

When Christofias appointed her to his cabinet in February 2008, the national budget was stillin surplus and the effects of the global crisis had not yet reached Cyprus, so labour relationswere peaceful. Today, the picture is very different. Against a background of a budget deficit anda growing public debt that has been condemned to ‘junk’ status by credit-rating agencies, unemployment has passed the 10% mark and is on an upward trend. It is the worst jobless ratein decades, especially in the construction, trade and manufacturing sectors, with more than aquarter of all under-25s out of work.

Charalambous, 49, has a reputation for keeping on top of her policy issues, holding her own innegotiations, and not shying away from a fight with the opposition. Now she is facing theprospect of a hard sell to her traditional constituency, in terms of the structural economicchanges likely to be set as conditions of a possible bail-out.

Charles Charalambous

2021 June 2012 THE CYPRIOT PRESIDENCY OF THE EU

Cyprus’s banking sector hastaken a massive hit becauseof its exposure to Greece.

One senior EU official, re-viewing Cyprus’s economicsituation, said this week thatit had “heavily depleted ac-cess” to financial markets.Cypriot banks suffered “in-ordinately” when the privatesector agreed to take hair-cuts as part of Greece’s bail-out, with huge Greek debtswritten off.

It means that Cyprusmight be obliged to becomethe fifth eurozone country tocall upon the European Fi-nancial Stability Facility(EFSF), the currency bloc’srescue fund. However, itmight yet go down a differ-ent route from Greece, Ire-land, Portugal and Spain,and instead take a bilateralloan from a country outsidethe EU.

Cyprus faces a deadline of30 June to recapitalise itssecond biggest bank, CyprusPopular, to the tune of€1.8bn. But it has not yetsubmitted an application for

a loan to the Eurogroup ofeurozone finance ministers,an EU official said on Tues-day.

Cyprus last year avoided aeurozone bail-out by negoti-ating a loan of €2.5bn fromRussia and may do so again.

“We are optimistic we willget the financing we need torecapitalise the banks,whether that will be througha bilateral agreement, orthrough the mechanism, theEFSF,” Vassos Shiarly,Cyprus’s finance minister,said on Tuesday.

Corporation taxCyprus sees advantages ingetting the money from out-side the EU because it wouldnot have to submit to the aus-terity and structural reformconditions that the eurozoneplaces on bail-outs. Suchconditions might well bringinto the spotlight its corpo-ration tax rate, which at 10%is the lowest in the EU.

Last year, Ireland was putunder pressure by the lead-ers of some other EU states,

most notably NicolasSarkozy, the then presidentof France, to raise its corpo-ration tax rate, also one ofthe EU’s lowest, when it re-quested a bail-out. Irelandsucceeded in preventing anychange, but the issue did nothelp in its negotiations to geta better deal, particularly inthe interest rate it paid onthe bail-out loans.

On the other hand,Cyprus’s government will bewary of looking too deeplyreliant on funding from Rus-sia just as it takes over thepresidency of the Council ofMinisters.

Cyprus’s influence in shap-ing the response to the euro-zone’s sovereign debt andbanking crisis will be limited.Most policy is being shapedin national capitals, betweenthe leaders of the eurozone’slargest economies, France,Germany, Italy and Spain,and by the team working forHerman Van Rompuy, thepresident of the EuropeanCouncil.

However, as the first coun-try to take over the presiden-cy while itself experiencingthe full force of the eurozonestorm, it will add a uniqueperspective – as long as it candeal with problems in its ownbackyard first.

Over the past few years,the strategic environmentin the eastern Mediter-ranean has changed radi-cally. Israel’s raid in May2010 on a Turkish vesselseeking to deliver aid tothe Gaza strip provoked afall-out between the twocountries, the region’s clos-est allies. The discoverylate in 2011 of gas reservesoff Cyprus’s coast – adja-cent to Israel’s massiveLeviathan field – by NobleEnergy, an American firmpart-owned by Israeli in-vestors, generated excite-ment among the GreekCypriots; and displeasurein Turkey and among theTurkish Cypriots, who saythat the island’s energywealth does not belong justto the internationally-recognised Republic ofCyprus but to all inhabi-tants of the island.

In February, BenjaminNetanyahu became thefirst Israeli prime ministerto visit Cyprus, a 20-minute flight from TelAviv. At the same time, Israel and Cyprus signed

agreements on defence co-operation, on the ex-change of intelligence, andon search and rescue mis-sions.

However, the new Israel-Cyprus alliance hasits limits, and the realign-ment may turn out to beshort-lived. “Let’s not foolourselves: Israel is not going to defend anyone but itself,” says Ioannis Kasoulides, a centre-rightMEP who was Cyprus’sforeign minister from1997-2003. Nevertheless,Kasoulides, from the op-position Democratic Rally(DISY), says the Cypriotgovernment has everyright to exploit its hydro-carbon resources. “I don’tthink mankind can sit ontrillions of tons of naturalgas and wait for the Cypri-ots to solve their prob-lems,” he says.

Hugh Pope, a Cyprusand Turkey analyst withthe International CrisisGroup, a think-tank, is also sceptical about thedurability of the new alliance. “Cyprus can’t

count on Israel,” he says.“Turkey-Israel is a muchbigger story than anythingto do with Cyprus.”

Should there be a recon-ciliation between Ankaraand Tel Aviv, Cyprus wouldagain find itself isolated in the eastern Mediter-ranean.

Frustrating talksThe one development thatwould dramatically alterthis, of course, is the reuni-fication of the divided is-land and the withdrawal ofthe Turkish troops thathave been occupying one-third of its territory since1974. But after four yearsof fruitless talks, withUnited Nations facilita-tion, prospects for a settle-ment have receded. “Idon’t believe now what Iused to believe six monthsago,” says Kasoulides,“that these talks will goanywhere.” Technical talkswill continue, but that isnot the level at which a so-lution will emerge.

In the meantime,Cyprus’s exposure to Greekdebt has deepened tradi-tionally close ties with Rus-sia. Last year, Cyprus se-cured a €2.5bn loan fromRussia at below-marketrates (see left), and might infuture prefer Russian aid toa eurozone bail-out.

In the hope of achievingwhat at best is likely to be amodest presidency, Cyprushas mobilised itself, de-camping a sizeable part of itsadministration to Brussels.It is doing several of thethings that a presidency vet-eran suggests are essential:to focus on a few priorities,while making sure thatbread-and-butter issuesmove forward.

On the eve of Cyprus’spresidency, the questionsthat linger are whether it willhave the capacity to dealwith the unexpected, the

skill and care needed to han-dle gritty issues, andwhether it will do as much asa small presidency can tofashion deals.

There are reasons for anx-iety. The Cypriot bankingsector is in crisis. Moving alarge part of the governmentadministration to Brussels isa gamble. And Cyprus haspresidential elections nextyear. This is not the best time– politically or administra-tively – to have a twin focus,on both domestic and EU af-fairs.

Those are among the con-

cerns of doubters, amongthem Graham Watson, aBritish Liberal MEP. Speak-ing on Monday (18 June)about the possibility of a dealon the long-term budget, hewondered “how you’re goingto achieve that under a pres-idency led by Cyprus with anend-of-term, enfeebled gov-ernment living on a lifelinefrom Moscow, unable to dealwith the problems they haveon the island”. His conclu-sion: “It seems to us [Liber-als] unlikely to be able to runa decisive presidency of theEuropean Union.”

A need for commitmentIf they are to dispel suchscepticism, Cyprus’s politi-cians will need to show com-mitment. To generate politi-

cal momentum for deals is atask that requires touringnational capitals, not justvisiting Brussels. That is achallenge amplified by thesmall size of Cyprus’s gov-ernment: it has just 11 min-isters.

Still, the ministers will berelatively comfortable withtheir portfolios and on the in-ternational stage. A largenumber have technocraticand international back-grounds (in diplomacy andfinance, for example). Be-cause the Greek Cypriots hadno university until 1989, theytend to have studied abroad,in countries ranging fromBulgaria to the UK. The for-eign minister, Erato Kozak-ou-Marcoullis, even knowssome Finnish.

For the presidency of asmall country to notch up in-dividual successes, says adiplomat from a previouspresidency, it must get intothe triangle between the European Parliament, theCouncil of Ministers, andHerman Van Rompuy, thepresident of the EuropeanCouncil. And Van Rompuy isseen as essential: a smallpresidency “can’t live withouthim”. But the Belgian Chris-tian Democrat is not a natu-ral soulmate for DemetrisChristofias, the Cypriot pres-ident, who is a Communist.

It may also prove a handi-cap that the ruling party –the Communists – is not a member of the largest left-wing group in the Parliament, the Socialists

and Democrats. For Cyprus to achieve its

broader goal – to ensure thatsolidarity is a major elementin the long-term budget –will require a shift in politi-cal debate. There is now lesstalk of austerity and more ofgrowth, but the debate hasyet to embrace the argumentof the Friends of the Cohe-sion Policy – that solidaritycan be seen as a stimulus forthe European economy.Winning more attention forthat position would be anachievement.

For Cyprus itself, thegreatest success might sim-ply be to change the narra-tive about Cyprus, to ensurethat the next time that itholds the presidency, expec-tations are not so low.

On the edge of a bail-out

The small size and major politicalproblems of Cyprus are creating lowexpectations, writes Andrew Gardner

Cyprus’s chance to win over the doubters

Cyprus will almost certainly need international financial assistance, but that may not come from the eurozone, writes Ian Wishart

Closer ties with Israel may benefitCyprus in the short-term, but it couldeventually find itself isolated in theregion, writes Toby Vogel

With friends like these...

GOOD NEIGHBOURSDemetris Christofias andBenjamin Netanyahu.REUTERS

ON BORROWED TIMECyprus Popular (Laiki)Bank. REUTERS