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Cyprus Country Brief

Overview of Bilateral Relations

Relations between Australia and the Republic of Cyprus are underpinned by strong people-to-people links. The essence of the relationship stems from the human ties developed by Cypriot migration to Australia, common British institutional inheritances, joint membership of the Commonwealth and Australia's support of efforts to find a just and permanent solution to the Cyprus dispute.

Australian Policy on Cyprus

Australia supports the sovereignty and territorial integrity of the Republic of Cyprus and recognises the Republic as the only legitimate authority on the island. The Australian Government urges all parties to continue to work towards the eventual reunification of Cyprus.

The Australian Government first appointed a Special Envoy for Cyprus in 1998. The present Envoy, the Hon. Jim Short, was appointed to the position in December 2000. Mr Short has undertaken extensive domestic and international consultations in support of efforts to secure a lasting solution to the Cyprus dispute.

Over 1000 Australian police officers have served as part of the United Nations Force in Cyprus (UNFICYP) since 1964, making a valuable contribution to the maintenance of peace and stability on the island. There are currently 15 Australian Federal Police officers serving with UNFICYP.

Community Links/ Immigration

The Cypriot community in Australia is thought to be the second largest outside Cyprus (the United Kingdom being the largest). According to the 2001 census, there were 19,481 Cyprus-born people in Australia, mainly concentrated in Victoria and NSW. Greek Cypriots migrated to Australia in three waves: during the nineteenth century gold rushes; between 1924 and 1964; and after the 1974 Turkish intervention. Turkish Cypriot migration began in the mid-twentieth century.

Bilateral Agreements

A bilateral agreement on social security - covering Australian pensions for age, disability and widowhood, and payments for children and carers - was signed in 1992. A Working Holiday Arrangement for 18 to 30 year- olds was concluded in June 2002.

High Level Visits

A parliamentary delegation led by Senator George Brandis visited Cyprus in July 2006. The Minister for Justice and Customs, Senator Chris Ellison visited in April 2003. His predecessor in the portfolio, Senator Amanda Vanstone, visited in April 2000, as did the then Shadow Minister for Finance and Consumer Affairs, Mr Lindsay Tanner MP. A parliamentary delegation led by the former Speaker of the House of Representatives, the Hon Neil Andrew MP, visited Cyprus in July 1999. Former Australian Prime Minister, Paul Keating, visited Cyprus in 1993 in conjunction with his attendance at the Limassol Commonwealth Heads of Government Meeting.

Mr Demetris Christofias, the President of the House of Representatives, visited Australia in March 2005. Republic of Cyprus Foreign Minister Ioannis Kasoulides visited Australia in March 2002 for the Coolum CHOGM. In November 1995 President Glafcos Clerides made a working visit to Australia following his attendance earlier that month at the Auckland CHOGM.

Trade and Investment

Trade between Australia and Cyprus is small, due to a combination of distance, the small size of the Cypriot market, as well as Cyprus' accession to the EU in 2004. Australia has nonetheless been successful in recent years in establishing a foothold in such niche markets as wine, foodstuffs and pharmaceuticals. Efforts continue to develop markets in educational services, tourism and seafood.

The value of Australian exports in 2005-06 totaled A$13.3 million, while Cypriot exports to Australia stood at A$6.1 million. Our largest export items are medicaments, household equipment and coke, while major Cypriot exports are cheese and curd products and medicaments.

Bilateral investment is also small, with the principal areas of activity being mining and banking. The Laiki Group and the Bank of Cyprus have established branches in Australia.

General Overview

Cyprus is the third largest island in the Mediterranean, after Sicily and Sardinia, with an area of 9,251 sq. km (or about four times the size of the ACT). It has limited agricultural land and natural resources, but its strategic location has resulted in its occupation by various powers over the centuries. Cyprus' population is estimated to be 935,000 (including north and south).

Political Overview

The Government comprises an executive President - who is directly elected for a five-year term - and a unicameral legislative arm, the House of Representatives. The current President, Mr Tassos Papadopoulos, was elected in February 2003. The President appoints the Council of Ministers, who may not be members of the House of Representatives.

The House of Representatives consists of 80 members, elected by a form of proportional representation. Fifty-six seats are occupied by Greek Cypriots, with the remaining 24 reserved for representatives of the Turkish Cypriot community (but they have not been occupied since 1963). Elections held in May 2006 saw the left-wing Party of the Progressive Working People (AKEL) and the opposition Democratic Rally Party (DISY) emerge as the largest parties with 18 seats each. with the centre-right Democratic Party of President Papadopolous (DIKO) securing 11seats. The Social Democrats (EDEK) won 5 seats, the European Party (EVROKO) 3 seats and the Ecologists and Environmentalists (Greens) 1 seat.

The Papadopoulos administration has stated its focus will be on achieving a workable and viable Cyprus settlement, consolidating EU accession, and ensuring Cyprus' entry into the Eurozone in early 2008. Cyprus became a member of the European Union on 1 May 2004.

Foreign Policy Issues

Since EU accession in 2004, the Republic of Cyprus has devoted considerable energy and resources to developing its relations with EU institutions and developing good relations with EU member states. The Republic of Cyprus attaches a high priority to close relations with Greece in particular, and there is a high level of bilateral political visits in both directions. The Republic of Cyprus also places considerable emphasis on developing its relations with countries in the Middle East, particularly Egypt, Israel and Iran. It sees itself as a bridge between Europe and the Middle East.

Multilaterally, the Republic of Cyprus is an active member of the UN, and has played a generally positive role with respect to disarmament issues, supporting, for instance, the Comprehensive Test Ban Treaty and the Chemical Weapons Convention. The Republic is a member of the Nuclear Suppliers Group, the Australia Group and the Proliferation Security Initiative. It is committed to global trade liberalisation and is a member of the World Trade Organisation. Cyprus is also an active member of the Commonwealth.

The Cyprus Dispute

The final period of British rule in Cyprus saw a bitter struggle against British colonialism and intercommunal rivalries between Greek Cypriots and Turkish Cypriots. In 1960 the Republic of Cyprus became independent under a power sharing arrangement between Greek Cypriots and Turkish Cypriots. Britain, Greece and Turkey became the guarantors of Cyprus' independence and territorial integrity. Friction between Greek Cypriots and Turkish Cypriots intensified in 1963 after President Makarios, claiming Turkish Cypriot obstructionism, sought to amend the Constitution. This was viewed by the Turkish Cypriots as an attempt to destroy their guaranteed minority rights. Intercommunal fighting broke out and the Turkish Cypriots withdrew to segregated enclaves. An uneasy truce was maintained by the establishment in 1964 of a UN peacekeeping force (UNFICYP).

The succeeding years saw little decrease in tensions. A coup against Makarios on 15 July 1974 organised by the Greek military junta, aimed at uniting Cyprus with Greece, was the trigger for a Turkish invasion and subsequent occupation of 37 per cent of the island. In 1975 Turkish Cypriot authorities unilaterally declared the so-called "Turkish Federated State of Cyprus". This was renamed in November 1983 the "Turkish Republic of Northern Cyprus (TRNC)", which is recognised as an independent country only by Turkey.

The United Nations made extensive efforts over the intervening years to broker a peace settlement to reunite the island. Under a good office mission commencing January 2002, the UN Secretary-General brokered a settlement plan, the 'Annan Plan', which was put to a referendum on both sides of the island on 24 April 2004. The settlement proposals were approved by 65 per cent of voters in the Turkish Cypriot community but rejected by 76 per cent in the Greek Cypriot community. Cyprus thus remains divided and the status quo remains.

Economic Overview

Since 1974, the Republic of Cyprus economy has experienced sustained growth, but remains heavily dependent on tourism, construction and maritime services. Economic policy continues to be dominated by efforts to align the Republic of Cyprus' economy with those of other EU members, including liberalising utility markets and providing greater autonomy to state-owned operations. The Republic of Cyprus joined the EU system of pegged exchange rate (ERM2) in May 2005 and currently aims to join the eurozone in early 2008.

GDP growth in the Republic of Cyprus is estimated to fall from 3.8 per cent in 2005 to 3.5 per cent in 2006. The inflation rate, which stood at around 2.6 per cent in July 2006, presents some risk for meeting the relevant Maastricht criterion for the adoption of the euro. In 2005, the budget deficit was 2.4 per cent, and there are plans for further reductions in 2006. Reducing the budget deficit and maintaining it on a downward trend will be a challenge, and steps are being taken to try to reduce public spending and increase tax collections, including by outsourcing some government services, increasing government taxes and charges, and raising the retirement age for civil servants. Another key objective, necessary for Cyprus' accession to the eurozone is to bring public debt from 70.3 per cent in 2005 to 58.1 per cent of GDP in 2008, as planned by the government. A final decision on Cyprus' preparedness to join the eurozone in 2008 will be made during the second half of 2007.

The so-called "Turkish Republic of Northern Cyprus (TRNC)" - Political Overview

The "TRNC" is a mixed presidential/parliamentary system with political power shared between the "President" and "Prime Minister". The "President" is elected for a five-year term and has the power to propose legislation or return it to the 50-seat "National Assembly". The current "TRNC President" is Mehmet Ali Talat, elected in April 2005.

The "TRNC's" principal foreign policy objective has been to secure international recognition as a sovereign state, and to consolidate ties with Turkey. Although the former objective has not been achieved, (with only Turkey recognising the "TRNC") the "TRNC" has established representative trade and/or tourism offices in a number of countries, including the US, UK, Germany and Australia, and has managed to gain observer status at the Organisation of the Islamic Conference and to send delegations to Assembly meetings of the Council of Europe. Elections to the north Cyprus 'Assembly' in January 2005 saw the Republican Turkish Party gain support to emerge as the largest party with 44.45 percent of the vote.

The "Turkish Republic of Northern Cyprus (TRNC)" - Economic Overview

The "TRNC" economy is much smaller, more narrowly based, and weaker than its southern counterpart. Per capita incomes in the north are a mere quarter of those in the south.

Since budget revenues only cover around two-thirds of administrative outlays, the "TRNC" is heavily dependent on Turkey for credits, grants and trade. Reliance on the Turkish Lira also means there is no effective local control over monetary policy. The economy has therefore suffered for many years from high imported inflation (an average of 80 per cent between 1991-2000), weaknesses in the banking system (including the collapse of seven local banks in December 1999), constant annual trade deficits, limited foreign investment and a large public sector accounting for over 20 per cent of total employment and 20.3 per cent of GDP.

24 October 2006