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Cyprus (11) -- Analyses -- 2010

More about the PRIO's paper

29.07.2010

The research, entitled, The Day After III: The Cyprus dividend for Turkey and Greece, is the third in the series of Day After reports written by the three-woman team Ozlem Onuz Cilsal, Praxoula Antoniadou Kyriacou and Fiona Mullen.
The authors look beyond Cyprus to the region, analyzing the peace dividend that awaits Turkey after a solution that unites the island, while also previewing the benefits for Greece. As always, the estimates made by the three economists are based on analysis of hard statistical data. They find that Turkey will not only make significant savings from property litigation and military expenditure but also stands to make huge financial gains from the transformation of the Turkey-Cyprus-Greece region into one of lasting peace and stability. This, in turn, will have positive spillover effects for tourism, transport, financial and business services, and last, but not least, energy.
Indicatively, they see additional revenues of 3.3 billion euros per year in tourism and transport, an estimated 7 billion euros boost to financial and business services, two billion euros for exports and a potential 33 billion euros for foreign investment as a result of opening the energy chapter in the accession talks with the EU, currently blocked as a result of the Cyprus issue. The authors also predict 5.1 billion euros per year in savings from property litigation (2.4 billion per year), military expenditure (2.2 billion euros per year) and from having to financially support the isolated Turkish-Cypriot regime in north Cyprus (480 million per year).
The authors' preview of the economic benefits to Greece identified savings of 2.3 billion euros per year in military expenditure, 50 million euros per year of income from gas transit, 110 million euros of additional tourism revenue and 19.8 billion euros per year in foreign direct investment.
In their first Day After report, the authors analyzed the main business opportunities that would arise from the reunification of Cyprus and quantified the peace dividend for the key sectors that would benefit. In their Day After II report, having researched the investment and reconstruction needs in the first few years, they went one step further by extending their analysis to the whole economy. They found that a peaceful solution that unites the island would generate EUR 12,000 per year per family on the island, create 33,000 new jobs and raise the real GDP growth rate by 3 percentage points per year on average for at least the first five years.
In an address at the launch of the report, Special Advisor to the Secretary-General on Cyprus Alexander Downer stressed that it was "a timely reminder of what business people on this island have been telling me for a long time: that a solution will bring huge opportunities for Cyprus, Turkey and Greece. And these benefits will long outlive any of the short-term costs".