Turkey Πressed to Οpen its Ports

New pressure for Turkey to open its ports to ships from Cyprus was exerted at the Maritime Cyprus 2007 Conference held in Limassol on 23-26 September. Those attending included the Vice-President of the European Commission responsible for Transport, Jacques Barrot, who pledged to do his utmost to end the Turkish embargo (which also applies to aircraft from Cyprus).

The 11th Maritime Cyprus Conference was attended by some 800 delegates from countries around the world and by representatives of several international organizations. The Secretary General of the Cyprus Shipping Council, Thomas Kazakos, said that the biannual gathering in Cyprus was one of the world’s three most important shipping conferences, together with those of Japan and Norway. Cyprus has the world’s ninth largest merchant fl eet, with over 1,200 ships, and the EU’s third largest, after Greece and Malta.

Speaking on 24 September, M. Barrot described the Turkish embargo as a problem not only for Cyprus but also for the EU and for Turkey itself, adding: “Please be assured that I will put all my efforts into solving this issue.” Turkey has maintained an embargo on ships and airplanes from Cyprus since 1987, despite undertaking to lift it when it secured the opening of formal EU accession negotiations in October 2005.

Cyprus Communications and Works Minister Maria Malachtou-Pamballi described M. Barrot’s pledge as “very important”, stressing that Turkey was obliged under international law to open its ports to Cypriot vessels. Her Permanent Secretary, Makis Constantinides, had earlier warned that unless the embargo was lifted Cyprus and other EU member states would not allow negotiations to begin on the transport policy chapter of Turkey’s EU accession negotiations.

The Cyprus Government asked Syria on 24 September why a cruise liner from Turkish-occupied Famagusta had been allowed to dock at the Syrian port of Latakia. In discussions with Cyprus Foreign Minister Erato Kozakou Markoulli in New York on 26 September, her Syrian counterpart, Walid al-Muallem, promised to look into the matter personally and to respond within a few days. He stressed that Syria had no maritime transport agreement with the “TRNC”, since it did not recognize it.


Budget Deficit to be Halved in 2008

The draft 2008 state budget as approved by the Council of Ministers on 7 September aims to reduce the budget deficit to 0.5 per cent of GDP - half the expected 2007 shortfall - in Cyprus’ first year as a member of the euro-zone. After its adoption by the House of Representatives, the budget will be published in the Official Gazette in euros at the EU-approved conversion rate of C£1 = €1.71.

The budget provides for a 7.1 per cent increase in expenditure, to C£3,855 million, against anticipated revenue of C£3,272 million, up 5.1 per cent. Social expenditure is projected to rise by 11 per cent, concentrated on education, social protection and the environment. Energy policy and road safety are also set for more spending.

Finance Minister Michalis Sarris told journalists that the budget combines continued fiscal rigour with enhancement of the social and developmental role of the state. “We are trimming deficits, containing public debt, redistributing spending for the benefit of growth and social cohesion”, he said, adding: “We believe that this will lead to a continued improvement in living standards and social cohesion and will assist our integration into the euro-zone.”

Mr Sarris expected annual GDP growth to continue at about 4 per cent in 2008, with public debt falling to 53.2 per cent of GDP. He also forecast that GDP per capita would rise to around 92 per cent of the EU average in 2008, from the current level of just under 90 per cent. Inflation was expected to increase slightly to around 2.5 per cent.

The Central Bank of Cyprus (CBC) decided on 10 September to maintain what CBC Governor Athanasios Orphanides described as “its waiting mode” by leaving interest rates unchanged. However, Mr Orphanides disclosed that banks had been instructed to curb “excessive” loans for second homes in order to avert the “credit crunch” which had been triggered in some EU member states by the sub-prime mortgage crisis in the USA.


Dual Pricing in Pounds and Euros

Compulsory dual pricing of almost all goods and services in pounds and euros came into force on 1 September, in advance of Cyprus’ scheduled accession to the euro-zone on 1 January 2008. Finance Minister Michalis Sarris said that the arrangements were an important part of preparing and informing Cypriots for a smooth changeover to the new currency. The EU-endorsed fixed conversion rate is C£1 = €1.71, or €1 = C£0.585274.

A week into dual pricing, Commerce, Industry and Tourism Minister Antonis Michaelides reported that many complaints had been received about unreasonable price increases on basic foodstuffs such as milk, bread and meat. Pledging that such complaints would be examined, he stressed that the only punishment available to the state was to “pillory” profiteering businesses and shops by publicizing their names.

Complicating the impact of dual pricing was the sharp rise in world cereal prices, which some food producers used to justify retail price hikes. Acknowledging this factor, Agriculture, Natural Resources and Environment Minister Photis Photiou on 12 September declared his intention to lobby the EU for easier access for grain from third countries with the aim of reducing animal feed and fl our prices.

Also of concern to the Government are EU mandated increases in VAT due to be applied on 1 January 2008 as Cyprus joins the euro-zone. Finance Minister Michalis Sarris confirmed on 17 September that, in concert with other new EU members, he would seek EU authority to postpone VAT increases on land purchases, foodstuffs and medicines “for as long as we can”.

European Commission figures released on 24 September showed that Cyprus was a net beneficiary from the 2006 EU budget to the tune of €86.3 million, equivalent to 0.73 per cent of its GDP. Funding received by Cyprus from all EU sources totalled €239.6 million, while its contribution to the EU budget was €153.3 million.


Summer Upturn in Tourism Maintained

An 8.1 per cent surge in arrivals of holidaymakers in August demonstrated the buoyancy of Cyprus’ tourist industry, taking arrivals in the first eight months of 2007 above the number in the same period in 2006. Also encouraging was a 4 per cent increase in revenue from tourism in the first seven months of 2007, including an 8.5 per cent rise in July.

Increased arrivals in the summer months boosted the total for January-August to 1,657,055 - 0.1 per cent more than in the first eight months of 2006. Revenue from tourism in January-July 2007 reached C£564.0 million, compared with C£542.2 million in the same period in 2006.

In terms of individual expenditure, Israelis topped the list by spending an average of C£70 a day while in Cyprus, whereas Americans were bottom with average spending of only C£30 a day.