No to direct trade with occupied area

Government Spokesman Vasilis Palmas stressed on 6 February that “direct trade” between the Turkish-occupied area of Cyprus and the EU remained “out of the question”. Commercial exchanges with the occupied north, he said, should continue to be governed by the EU’s Green Line trade regulation of April 2004.

A draft regulation providing for “direct trade” with the occupied area was tabled by the European Commission in July 2004 but has been opposed by Cyprus and other EU member states because it would effectively upgrade the status of the illegal occupation regime. In February 2006 Cyprus secured an EU decision to decouple the “direct trade” regulation from one providing for EU fi nancial aid for the Turkish Cypriots, which is being implemented (see report below).

The Green Line regulation established a legal framework for trade in goods and services from 1 May 2004, in light of the suspension of EU law in the occupied area pending the conclusion of a political settlement of the Cyprus problem. It specifies that products produced in the occupied area can be sold in the free areas but only exported to other EU countries via the legal Government-controlled ports of Cyprus.


ECJ suit over aid

Foreign Minister Erato Kozakou-Marcoulli confirmed on 14 February that the Cyprus Government is taking the European Commission (EC) to the European Court of Justice (ECJ) over the terms under which EU financial aid of €259 million for the Turkish Cypriots is being disbursed.

The aid was provided for under an EU financial regulation adopted shortly before the accession of Cyprus to the EU in May 2004. It remained available despite the non-implementation of the EU acquis in the Turkish-occupied area, the EU’s declared aim being to prepare the Turkish Cypriots for eventual EU membership in a reunified Cyprus.

The complaint centres on an EC tender for a project in the energy sector envisaging the participation of “state” organizations in the Turkish-occupied area. Describing this apparent upgrading of the illegal regime as “a bad precedent”, Mrs Kozakou-Marcoulli said that Government lawyers had deemed it to be “unacceptable and incompatible with the spirit and the letter of the financial regulation”.


Quality of shipping to be maintained

The Government’s goal of ensuring continuous improvement in safety and quality standards on Cyprus-registered ships was reaffirmed by Communications and Works Minister Maria Malachtou-Pamballi in an address to the fifth Digital Ship Conference held in Limassol on 5-6 February. Organized by the Cyprus Shipping Council (CSC), the conference brought together owners and managers from around the world to discuss the latest information and communications technology affecting the shipping industry.

Describing shipping as “the lifeblood of world trade”, Mrs Malachtou-Pamballi gave details of Cyprus’ active participation in various international initiatives to enhance ship safety and security and to protect the marine environment. She also pointed out that in recent years Cyprus has adopted a series of safety and other measures to upgrade and modernize its fleet, paying particular attention to the welfare of seafarers employed on Cypriot ships.

Mrs Malachtou-Pamballi noted that, in order to enhance the new quality image of the Cyprus flag, Cyprus had participated voluntarily in the audit scheme of the International Maritime Organization (IMO), becoming the first open register to pass the audit. She concluded: “I assure you that Cyprus will spare no effort to maintain a register of high quality and to participate actively in all international fora where policy decisions on shipping are taken.”


Pledge to utilize all available EU funds

The Government’s Planning Bureau insisted on 14 February that all EU funds available to Cyprus for 2004-06 would be utilized within the specified deadlines. Its statement followed the publication of a European Commission (EC) report showing that Cyprus’ absorption of its 2004-06 EU funding stood at 62 per cent, the lowest proportion among the 10 countries which joined the EU in May 2004.

According to the EC report, the average absorption rate of the 10 new EU members was 75 per cent, with Hungary heading the list on 82 per cent. Among the 15 pre-enlargement member states, utilization of EU funds averaged 84 per cent, varying between 94 per cent for Sweden and 73 per cent for Greece.

The Bureau noted that EU funds allocated to Cyprus for 2004-06 totalled €109 million, consisting of €55 million from the structural fund and €54 million from the cohesion fund. It said that €28 million of structural funding had been absorbed by end-2007 and that a further €11 million would be absorbed shortly, while plans were in hand for the absorption of the remainder by the end-2008 deadline. Of the available cohesion funding, €28 million had been taken up to date or would be shortly and the remaining €26 million would be utilized by the end-2009 deadline.

The Bureau attributed the slow take-up of EU funds to factors such as the delay, due to local objections, in the construction of a new  waste disposal plant at Lymbia, the biggest of the projects attracting funding. It also pointed out that whereas other new member states could use structural funding for agricultural subsidies, which could usually be disbursed quickly, Cyprus was barred from such usage because of its high per capita income.

Cyprus will receive €5.9 million of €9 billion in cohesion funding approved by the EC on 20 February for 450 renewable energy and energy efficiency projects across the EU in 2007-13. Announced the following day was Cyprus’ research, technological development and innovation programme for 2008-10, the €160 million cost of which will be partly funded by the EU.


Development Bank privatization completed

Finance Minister Michalis Sarris on 7 February welcomed the completion of the privatization of the Cyprus Development Bank (CDB), which was sold to the Emerging Financial Partners (EFP) consortium for €75 million. The Government had owned an 88 per cent stake in the CDB, the other 12 per cent having been held by the European Investment Bank.

The EFP consortium consists of Path Holdings, which has a 20 per cent stake, Leon Investments (20 per cent), Konstantinos Shakolas (16 per cent), Delfis Investments (14.37 per cent), Leonidas Ioannou (14.37 percent), Intergaz (10 per cent), CLR Investment Fund (5 per cent), Panikos Katsouris (0.13 per cent) and Antonios Gerolemou (0.13 per cent).


Post Office faces up to losing monopoly

The state-owned Cyprus Post Office has declared its determination to carry out major internal reforms to enable it to compete when it loses its monopoly on letter deliveries. Under an EU directive finally approved by the European Parliament on 31 January, member states’ postal services must be opened to full competition in 2011, although Cyprus and 10 other countries have been given special dispensation to delay liberalization of their services until 2013.

In an interview published on 8 February, newly appointed Postal Department head Andreas Gregoriou said that the EU directive “presents an opportunity for the Post Office to improve in quality and efficiency”, with benefits for both customers and employees. He added that discussions to convert the Post Office into a semi-governmental organization were already underway.