Gold Magazine April - May 2013, Issue 25 | Seite 34

COVER STORY

YES
XXX
WE
CAN

Fortune Favours

The Brave

DESPERATE TIMES DEMAND DESPERATE
MEASURES. NOW IS THE TIME TO SEEK
DÉTENTE WITH TURKEY

L

et me begin my economic assessment for Cyprus
with this point: matters
are going to get materially worse. Once this sad
truth is accepted, recovery will come sooner and
more swiftly if those in the Republic take
a bold decision: to engage in détente with
Turkey. The simple truth that we Greek
Cypriots must accept is that now is the
time for a rapprochement with Turkey. Let
us remember, after all, that as much as the
Greek Cypriots feel betrayed by the EU, so
do many Turks feel shamefully cold-shouldered by the same organisation, one whose
economic fortunes will stumble from bad
to worse.
The recent events that have unfolded in
Cyprus are part of an ongoing sequence of
unpleasant shocks, not simply within the
eurozone but in the wider EU. And whilst
attention has been focused on the eurozone
– and led to gross exaggerations of its potential to fragment – the looming problem
of what awaits non-euro nations has been
overlooked. Unlike Cyprus, Greece and
other distressed countries within the euro
bloc, all those other European states with
sovereign currencies can – and very likely
will – devalue against the euro. My confidence in this belief is based on considerable historic precedent, from Argentina to
Indonesia and on many other instances of
significant exchange rate corrections over
recent decades. Once these currency corrections occur – next year is my guess – deflationary pressures within the eurozone will
worsen and make Japan’s lost economic
decades an ever-closer and alarming template for the eurozone.

By Dr Savvas
Savouri

Rather than allowing itself to be drawn
even further into this maelstrom, Cyprus
must forget the naïve notion of breaking
away from the eurozone and break open
talks with Turkey. Those aghast at the
mere suggestion of this should remember
that desperate times demand desperate
measures. The plain fact is that, whilst the
European economies are generally facing
up to an unpleasant future, Turkey promises to be one of the brighter economic
lights.
Seeing clearly that its entreaties to join
the EU have been rejected, Turkey can
now focus its growth away from the EU
and, for a start, on ever-closer economic
engagement with its neighbour Russia.
There is also even more lucrative potential
with the Turkic language-speaking former
Soviet Republics. Azerbaijan, Uzbekistan, Kazakhstan et al are enjoying strong
resource-driven growth from which Turkey
has already been benefiting. Cyprus can
watch Turkey’s economic rise or – far more
sensibly – it can engage with it.
In short, Greek Cypriot leaders must
put aside ill feelings over an event which
is coming up to its 40th anniversary and
ensure that the country has an economic
future. After all, when a national emergency hits there is no room for petulance
or prejudice, just pragmatism. All options
have to be considered, however great a reticence there is to do so. And for Cyprus this
is as serious a national emergency as it has
ever faced; yes, it is even on a par with the
events of 1974.
Would Turkey be open to conciliatory
tones from Nicosia? I think so. The reason
I believe that Ankara is open to détente is
that it will quickly see the economic conta-

When a national
emergency hits
there is no room
for petulance or
prejudice, just
pragmatism
gion from the Republic of Cyprus into the
self-proclaimed TRNC. The north cannot
fail to suffer as free-spending travellers
across the Green Line will not now be so
free-spending. Moreover, ‘cheap’ northern
property and land will find itself in competition with ever-cheapening assets across
the south.
As for alternatives to my suggestion, I see
none. I find fanciful the idea that China
will come to the rescue. Indeed, rather than
the Chinese arriving I see both the Russians and the Britons decamping. As for
capitalising on the still largely unquantified
oil and gas around the shores of Cyprus,
this has promise but it will be more quickly
achieved with Turkey’s help rather than
hindrance.
It could be argued that what has happened to Cyprus is the best thing possible,
forcing a reappraisal of its ability to be
stubborn in its demands for reunification
and being economically disengaged from
Turkey.

info: Dr. Savvas Savouri is a Partner and Chief Economist of Toscafund.

34 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CY