Share the article
twitter-iconcopy-link-iconprint-icon
share-icon
WorldJanuary 5 2015

George Vassiliou's Cypriot vision

The Cypriot economy is heading towards a recovery, according to former president George Vassiliou. But, he says, reunification is key if the country is to achieve its full economic potential.
Share the article
twitter-iconcopy-link-iconprint-icon
share-icon

George Vassiliou is a very well-respected man in Cyprus. The country’s president from 1988 to 1993, he also headed the negotiating team for the accession of Cyprus to the EU in 2004. Mr Vassiliou still has a lot of supporters in the country, including the taxi driver who picked this writer up from a meeting with the former president and described him as one of the greatest politicians of the age. People listen when Mr Vassiliou speaks, and so when he says the Cypriot economy is recovering and that confidence is returning, it counts.

“The fact is, the crisis essentially destroyed the image of Cyprus as a sound place to invest deposits,” says Mr Vassiliou. “That was the situation in March 2013, and, as a result, people did not deposit their money in the banks. They kept it at home, they bought safes. And it is estimated that about €1.5bn is still in homes because of this lack of confidence.

“But within a relatively short period of time, we have succeeded in creating a feeling of confidence [again].”

Positive steps

One of the main factors contributing to this change in sentiment, says Mr Vassiliou, was the Bank of Cyprus’s success in raising capital ahead of the recent bank stress tests. In July 2014, the lender raised €1bn from investors, including the European Bank for Reconstruction and Development and investors from the US – a first for Cyprus.

“This was a vote of confidence for Cyprus and, as a result, deposits have started coming back,” says Mr Vassiliou. “It’s still a slow [process], but it will get faster.”

The wider economy is gradually starting to recover, too, and Mr Vassiliou believes that the government will stimulate further growth in the near future. For instance, plans to privatise the telecommunication and energy businesses, as well as the port authority, should give a considerable boost to the economy. “There is a need to move as fast as possible on the privatisation process, and the government is working on that,” says Mr Vassiliou.

Home to what is already the 10th largest merchant fleet globally and the second largest ship management centre in the world, once privatised, Cyprus’s harbours could grow into a sizeable shipping hub. Public private partnerships are already being promoted for the southern coastal city of Larnaca, while a port operator for the country’s second largest city, Limassol, will be chosen by the end of 2015.

Long-term vision

In the medium term, Mr Vassiliou is expecting the government to implement the necessary reforms to keep Cyprus’s recovery on track. However, he is still worried about the country’s long-term future.

A topic very close to his heart is the reunification of the country. A supporter of the Annan plan – the UN’s proposal to divide the country into two states joined by a single federal government – Mr Vassiliou says that he was deeply disappointed when the country’s largest political party, the Progressive Party of Working People, rejected the plan in the lead up to the 2004 referendum on reunification. The outcome of the referendum saw just 24% of Greek Cypriots vote in favour of the plan, compared with 65% of Turkish Cypriots.

The discovery of gas reserves in the Cypriot Exclusive Economic Zone, announced at the end of 2011, has ignited further tensions between Cyprus and Turkey. Turkey, which does not recognise the Cypriot maritime border agreements that put the reserves within its territory, initially said that it would not tolerate Cyprus’s plans to develop the gas field. Nevertheless, Cyprus has started drilling in the field, and managed to attract large international corporates to invest in the project.

The importance of these newly discovered gas reserves, which lie off the southern coast of Cyprus, makes Mr Vassiliou certain that the topic of gas will be closely linked with the future of the country and its reunification. “We haven’t seen much progress despite the fact that the president [Nicos Anastasiades] was one of the people who was in favour of a ‘yes’ vote to the Annan plan,” he says. “This is mainly because of the entrenchment on the Turkish side and partly because of our nationalists putting up pressures and difficulties.

"But I think, once the negotiations start again, the climate is now such that we may see progress. I cannot promise anything, but we know that we have no choice and we have to fight for it,” he says.

Mr Vassiliou has a vision of making Cyprus into a hub for gas exports, both its own reserves and those from Israel and Lebanon, which could be transported via a pipeline to Turkey and into Europe. “Our nationalists want to have liquefaction here because they don't have confidence in the Turkish,” he says. “My position is that the Turks are our neighbours, and we must have confidence. It would really be a win-win situation for Turkey, for Turkish Cypriots, for Greek Cypriots, for Greece, the UN and everybody.”

Was this article helpful?

Thank you for your feedback!

Read more about:  Western Europe , Cyprus