Tag: Eurozone

  • Cyprus ponders another start

    Cyprus ponders another start

    AS IT grapples with the prospect of years of economic pain, Cyprus will try to draw strength from its not-so-distant experience of invasion – and the fact that a whole generation knows what it means to rebuild from scratch.

    But it is a tough task.

    Customers queue up outside a branch of Laiki Bank as they wait for the reopening of the bank in Nicosia. Picture: REUTERS
    Customers queue up outside a branch of Laiki Bank as they wait for the reopening of the bank in Nicosia. Picture: REUTERS

    Any inspiration will be badly needed in the small east Mediterranean island nation of under a million people, as even the most optimistic forecasters predict years of recession and sky-high unemployment.

    In many ways, the challenge facing Cyprus now, following an international bailout that effectively wipes out a hefty chunk of the banking sector, is more daunting than the events of 1974 when the island was split into an internationally recognised Greek-speaking south and a breakaway Turkish north, following Turkey’s invasion in the wake of an attempted coup by supporters of union with Greece.

    The country’s room for manoeuvre is limited, given that it has already largely exhausted the potential for development from a primarily agricultural state.

    And any reboot of the economy of the Greek-Cypriot side – the part of the island that has joined the European Union and is afflicted by the recent bailout woes – will have to be done within the limitations of a colossal debt mountain, a collapsed property bubble, a sclerotic European economy and a seeming dearth of international sympathy.

    “It’s an economic tragedy this time and the difference is you don’t know where it’ll end up,” said Andreas Georgiou, 80. “This could stir social unrest, people are worried about their families and about putting their kids through school. In 1974, we had support from the outside, our people were willing to go abroad and find work to send money home. But could this happen again?”

    After the invasion, Turkey ended up with control of nearly 40% of the island and much of its economic potential.

    Greek-Cypriots were largely cut off from the world, losing the deep-water port of Famagusta and the international airport in Nicosia, which has since been home to peacekeeping troops from the United Nations.

    The Turkish side also ended up with the bulk of the country’s pre-1974 agricultural base as well as the lion’s share of the burgeoning tourism industry.

    And tens of thousands of refugees living in camps had to be rehoused.

    The University of Cyprus has estimated that the invasion and division cost Greek- Cypriot individuals and companies over à109-billion.

    Despite the economic devastation wrought by the invasion, Cyprus found itself on the mend, at least economically, within a few years of the event as the government backed a series of emergency economic plans with international support.

    Between 1976 and 1997 Cyprus was growing at over 6% a year, with tourism at the heart of the economy’s rebirth.

    Businesses, big and small, prevailed as many of the country’s youth returned home after getting university degrees around the world, notably from Greece, Britain, and the US.

    “A lesson that came out of 1974 was that people learnt that you could lose your property and your money, but if you’ve got an education, you can start again and rebuild,” said James Ker-Lindsay, a senior research fellow at the London School of Economics, who has written extensively on modern Cyprus.

    However, one unintended consequence of that drive to educate was the unbalancing of the Cypriot economy away from agriculture and tourism towards financial services, said Ker-Lindsay.

    The booming financial sector got a further turbo charge from the collapse of the Soviet Union in the early 1990s, and Russian money – some thought to be of dubious origin – started flowing into the country’s banks, an influx of capital that further unbalanced the economy.

    Membership of the EU in 2004 and the adoption of the euro four years later were meant to solidify the country’s advance and set a course for further prosperity.

    However, Europe’s debt crisis, and in particular the problems of Greece, tore up the Cypriot economic model and the country eventually had to accept an onerous package of measures to stave off bankruptcy.

    – Sapa-AP

    * This article was first published in Sunday Times: Business Times

    via Cyprus ponders another start | Business Times | BDlive.

  • Frustrated Turkey still wants EU entry, but maybe not euro

    Frustrated Turkey still wants EU entry, but maybe not euro

    By Mohammed Abbas

    LONDON | Wed Feb 13, 2013 2:14pm EST

    Turkey's EU Affairs Minister Bagis talks during an interview with Reuters in Istanbul

    (Reuters) – Turkey is committed to joining the European Union despite mounting frustration over decades of talks on the issue, but has little appetite for adopting the euro currency, a senior Turkish official said on Wednesday.

    In a speech in London, Turkey’s chief negotiator on EU accession said it was time the EU made up its mind on whether Turkey can join the 27-member bloc, and said it should be allowed in even if some countries object.

    Talks on Turkish integration into Europe originally began in 1963, but the intractable dispute over the divided island of Cyprus – an EU member that Turkey does not recognize – have blocked talks on several policy issues candidate states must conclude before entry.

    “We want to be in the EU, but the EU has to make a decision. The decision to start the negotiation process with Turkey was a unanimous decision, and only a unanimous decision can put an end to this process,” Egemen Bagis, EU affairs minister and senior member of the ruling Justice and Development (AK) Party, said.

    “If there’s one principle of the EU I would like to criticize it’s the unanimity principle … One single member country, the Greek Cypriots, can block the opening of the energy chapter,” he said, accusing Cyprus of holding the EU “hostage”.

    The island was split in a Turkish invasion in 1974 triggered by a brief Greek-inspired coup.

    Turkish Prime Minster Tayyip Erdogan has said the delay was “unforgivable”, warning that the EU would lose Turkey, a mostly Muslim and largely conservative country, if it was not granted membership by 2023.

    Enthusiasm among the Turkish public for EU membership is waning given the bloc’s economic woes, particularly the sovereign debt crisis hitting some members of the currency union, but Bagis was confident any referendum would pass.

    “If there was a vote today I could easily get a yes vote … on membership of the EU, but I’m not so sure about joining the euro zone,” Bagis said.

    GROWING INFLUENCE

    That could pose problems for accession given that joining the euro zone single currency bloc is a condition for entry.

    However, Bagis said economic circumstances and opposition to the euro and could change by the time accession is agreed.

    Formal talks to join the EU have stalled since they were launched in 2005, and Turkey has completed only one of the 35 chapters need for entry.

    On Tuesday, France said it was ready to unblock membership talks on one of the chapters, in contrast to its position under former President Nicolas Sarkozy, who said Turkey did not form part of Europe.

    Bagis said France’s change of heart was “better late than never”, and lambasted “narrow minded” politicians who have objected to accession, citing discrimination and Islamophobia.

    Some EU countries express concern about Turkey’s handling of human rights, freedom of expression and treatment of minorities. Turkey says it is addressing those concerns, and on Wednesday drafted changes to its penal code [ID:nL5N0BD3D9].

    Bagis dismissed concerns about mass Turkish emigration to other EU countries after accession, saying that Turkey’s growing economic clout meant that it instead was at risk from immigration from other EU states.

    “Of course, every nation has their pride. So does mine. And no country has been kept in the waiting room for 54 years. Sometimes our reactions might seem emotional, but believe me if anyone else was in our shoes …,” he said, referring to when Turkey applied for association with the then European Economic Community.

    Turkey, a long-time NATO member, has seen its diplomatic influence rise alongside its economic prosperity. The Islamist-rooted AK Party says Turkey has jumped to 16th largest economy in the world from 26th since it came to power in 2002.

    Turkey’s stock is particularly high in the Middle East, where it is seen as a model for a prosperous Islamic democracy, and has won admiration for its tough stance on Israel.

    Bagis touted Turkey’s sway in the Middle East as a major boon for Europe should it be allowed to join the EU.

    “The EU is the grandest peace project in the history of mankind … Turkey, being the most eastern part of the West, and the most Western part of the East, can turn this continental project into a global peace project,” he said.

    (Editing by Alison Williams)

    via Frustrated Turkey still wants EU entry, but maybe not euro | Reuters.

  • Turkey must adopt euro if accepted as EU member

    Turkey must adopt euro if accepted as EU member

    Turkey must accept the euro as its national currency if it joins the European Union, European Commissioner Stefan Füle says. PM Erdoğan said in October Turkey might establish a lira zone

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    A secene from European Commissioner for Enlargement and European Neighbourhood Policy Stefan Fule’s speaking during a news conference in Brussels last year. Füle says Turkey will adopt the euro as its national currency after joining the European Union. EPA photo

    A secene from European Commissioner for Enlargement and European Neighbourhood Policy Stefan Fule’s speaking during a news conference in Brussels last year. Füle says Turkey will adopt the euro as its national currency after joining the European Union. EPA photo

    Turkey will adopt the euro as its national currency if it becomes a member of the European Union after fulfilling the required conditions, European Commissioner Stefan Füle said Feb. 11.

    Füle’s comments came in the wake of a written question from EU Parliament member Mario Borgezio following Turkish Prime Minister Recep Tayyip Erdoğan’s recent statement that Turkey planned to create a Turkish Lira-based monetary zone instead of accepting the euro as a national currency after joining the European Union.

    Füle, the European commissioner for Enlargement and European Neighborhood Policy, noted in his answer Turkey’s obligation to accept the euro as part of the negotiations framework.

    “After the EU Council approves the membership of Turkey [subject to its fulfilling the required conditions], Turkey will join the economic and monetary union and adopt the euro as its national currency,” he said.

    British example

    Füle also said the EU Council had never invited Turkey to present its own position in terms of economy and monetary policy negotiations – a chapter that has not yet been opened.

    Erdoğan said some EU members had advised Turkey to stay out of the eurozone and establish a “Turkish Lira zone” instead amid the continuing accession talks.

    “Securing political stability in Europe is critically important to maintain the confidence of European societies in the union and the euro,” Erdoğan said in October in Germany.

    “I know that there are some EU member countries which say, ‘I am against the euro, I do not want to take part in the eurozone.’ For instance Britain… It is quite satisfied. They even say ‘You should stay away from the eurozone, you can establish a Turkish Lira zone.’ And I said I think the same way, too. The EU should check up on itself regarding the monetary system,” he said.

    February/13/2013

    via ECONOMICS – Turkey must adopt euro if accepted as EU member.

  • UK ‘planning for eurozone collapse’

    UK ‘planning for eurozone collapse’

    Lord Sassoon
    Lord Sassoon said Britain wanted to see a 'strong and dynamic' eurozone and European economy

    The Government is undertaking “extensive contingency planning” in the event of a eurozone collapse, peers have been told.

    Treasury minister Lord Sassoon said the planning was aimed at dealing with “all potential outcomes of the eurozone crisis”.

    At question time, he said Britain wanted to see a “strong and dynamic” eurozone and European economy.

    But he stressed it was for the eurozone countries to “take the lead in supporting the euro as a currency”.

    Lord Sassoon also indicated that Britain would be prepared to stump up more cash to tackle the crisis if the IMF requested it.

    “The Government sees the role of the IMF to support individual countries and not to support currencies.

    “If the IMF puts forward a case, as it may well do, for an increase in its resources, if there is a strong case the UK will, as it has always done in the past, support the IMF in increasing resources as required,” he said.

    Tory former chancellor Lord Lawson of Blaby said: “There is only one thing as worrying as the collapse of the eurozone and that’s the continuation of the eurozone.”

    He said it has been shown to be “fundamentally flawed and the cause of all these problems”.

    Lord Lawson said ministers needed to look at the risk of a banking meltdown, adding: “If it should prove necessary for the UK Government to rescue any British banks, they should do so on much tougher terms than the ludicrously soft terms which the previous administration used.

    www.thisislondon.co.uk, 18 January 2012

  • Euro is ‘unsaveable’

    Euro is ‘unsaveable’

    eurozoneTelegraph columnist Ambrose Evans-Pritchard tells Robert Miller why the single currency cannot work in its current form, and what he believes will happen to the next.

     

  • Eurozone needs reform, say Greek and Turkish experts

    Eurozone needs reform, say Greek and Turkish experts

    ISTANBUL – Hürriyet Daily News

    A euro sculpture sits on display at the Frankfurt International Airport. Europe's single currency is under threat from a sovereign debt crisis ravaging the continent. Bloomberg photo

    The eurozone is in need of “immediate structural changes” if it is to prevent a possible domino effect related to the current debt crisis, according to prominent Greek and Turkish academics.

    Speaking in Istanbul at a foreign policy forum of the Turkish Industry and Business Association, or TÜSİAD, on Friday, academics emphasized the importance of stability in the 16-member euro area. The speakers were Vassilis Pesmazoglou from Peleponnese University, Georgios Pagoulatos from Athens Economy and Trade University, investor Aristeidis Doxiadis, Hakan Yılmaz from Istanbul’s Boğaziçi University and Volkan Vural of the TÜSİAD board.

    At the meeting, held according to Chatham House rules, one academic noted a previous rule that a country with a deficit higher than its gross national product could not be accepted as a full member to the eurozone. “This rule was changed for the sake of having Portugal and Spain as full members,” he said. According to the academic, this gap was also used by Greek officials.

    A major reason for the crisis was “with no doubt, the irresponsibility of leaders and mismanagement of resources,” said another participant, adding that euro-skepticism in Greece is on the rise thanks to support from the unemployed youth.

    “Greece might turn the crisis into the first major step of the reconstruction of its economic system,” said another speaker. “A more export-oriented economic performance might lead the way out. The Greek and Irish cases should be understood well to prevent a possibility of a Spanish crisis, which the European Union might not be able to handle.”

    The eurozone cannot let Ireland, Portugal and Spain default on its debts, according to another speaker. He said that if Greece was permitted to split from the eurozone, speculators’ attention would soon turn to much larger states with formidable public deficits, including Spain and Portugal.