Cyprus leaders seek deal in ‘historic opportunity’ for peace

9 January 2017
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The leaders of both sides of ethically divided Cyprus have sought to temper hopes of a swift breakthrough in unification talks that started on Monday, initially focusing on how to handle property disputes stretching back more than 40 years.

Hoping to succeed where others failed Cyprus President Nicos Anastasiades and Turkish Cypriot leader Mustafa Akinci met in Geneva to tackle dozens of disagreements stemming from the 1974 division of the Mediterranean island.

The talks between the two are scheduled to broaden to include other nations with a stake – Britain, Greece and Turkey – on Thursday.

Both leaders have been careful this week to cool any expectations of a deal. Conference organisers have also begun suggesting the process might be more open-ended than initially thought.

Arriving at the United Nations European headquarters in Geneva and asked if he was optimistic, Anastasiades said: “Ask
me when we are finished.”

Akinci was equally circumspect, saying on Sunday: “We are not pessimistic, but I see no need for exaggerated expectations that everything will just happen. We are expecting a difficult week.”

New UN Secretary-General Antonio Guterres, who was expected to attend the conference on Thursday, has described the talks as an “historic opportunity” for a breakthrough.

But the issues are difficult. Power-sharing, redrawing territorial boundaries, and security issues in a future reunited homeland are key sticking points in negotiations that have resulted in logjams in the past.

Property rights were on the agenda on Monday, a sensitive issue for thousands of internally displaced people who were driven from their homes on one side of the island to the other in and after 1974.

It was then that Turkey invaded the island’s north after a brief Greek-inspired coup. The seeds of partition, however, were sown years earlier, soon after independence from Britain in 1960.

A combination of restitution, compensation and exchange were being discussed, the financing is unclear. IMF and World Bank officials in Geneva would be discussing the issue with the two sides on Monday.

Caution

Despite the caution expressed, mediators are keen to capitalise on the momentum of two moderates at the helm of their communities before domestic election cycles dislodge the process.

The status of some 30,000 Turkish troops stationed in Cyprus’s north is crucial. The Greek side insists they must all be pulled out, while the Turkish side says some must remain.

That issue will dominate discussions between Britain, Turkey and Greece on Thursday. The three are guarantor powers of Cyprus under a 1960 treaty that granted the former colony independence.

Britain retains two strategically important bases on the island which are used in operations against Islamic State. London has said it would be willing to relinquish about 49 percent of the 98 square miles presently held to facilitate territorial adjustments. Much of that territory is now civilian.

Any agreement must be put to separate referendums in the two communities, with diplomats anticipating a vote around June. A previous peace blueprint put to referendum in 2004 was accepted by Turkish Cypriots but rejected by Greek Cypriots.

Analysts shy away from suggestions the process could be a last chance for peace, but say a unique opportunity could be lost in settling a conflict which has brought Greece and Turkey to the brink of war, and frustrates Turkey’s ambitions of joining the EU.

“If this time it fails between these two pro-solution leaders…then a huge motivation will be lost,” said academic Ahmet Sozen, a Cypriot who has followed on-off peace talks for years.

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Former US Treasury Secretary Jack Lew will stress that fiscal improvement by Greece over the last few years lays the foundations for much needed future growth, while at the same time reiterating that reforms in the country must continue in order to attract investments. Lew’s comments are part of an interview to the Economist on the occasion of his address at a conference sponsored by the London-based media group in Athens on Monday. The conference’s title is “How fast can we grow?”, which will take place at a seaside resort southeast of Athens. The influential one-time treasury secretary in the Obama administration conceded that differences of opinion existed with the European side over macro-economic issues, while qualifying that preservation of the Atlantic alliance and the European Union was always a common position.  Lew’s interview, in full: Do you detect a reverse in the course of the Greek economy? Or is it still too early?  On the one hand, Grexit seems to have left the table, but on the other hand we still don’t see any growth rates that would point to a success story in Greece. Greece has clearly made progress.  The most recent IMF review reflected that progress, as do measures of economic performance.  After a period of better growth, the economy did flatten out, but improved fiscal conditions are a basis for better growth in the future, and a first step back into capital markets reflects that progress.  Countries cannot simply cut or borrow their way to sustained growth.  To reach sustained growth and improved income equality requires a balanced and disciplined approach that supports both economic demand and investment – which is why maintaining reforms and ultimately reaching an agreement on debt restructuring remain so important.  With this balanced approach, Greece should be an attractive place to invest, and should see growing access to capital markets. There is still more work to be done, but with the continued determination of the Greek people and their elected government, and the ongoing cooperation of international partners, the future holds the promise of further economic improvement in this birthplace of democracy. As it emerges from the Eurogroup meeting of June 15​th in Luxembourg, the IMF will continue to participate actively in the Greek program, but will only disburse money if and when the medium term measures on the Greek debt​ are specified. How do you evaluate this development? Is it a good solution? I have long agreed with the IMF that debt restructuring is essential to achieve a long term solution that puts Greece back on a path to sustained economic growth.  It is in the interest of Europe, as well as the IMF and the US, for Greece to be on an economic path that promotes domestic and geopolitical stability.  I was encouraged that the Luxembourg meeting produced greater certainty that debt restructuring will be addressed, and in that context hopefully resolve the Greek financial situation so that it does not require constant revisiting.  That in and of itself will help produce a better environment both for economic growth and political stability.  Since Luxembourg, additional progress on the IMF review and an initial step into the private capital markets are both positive developments. In your opinion, where should the Greek side give more emphasis? On the demand for​ ​further​​ frontloaded debt relief or on the implementation of reforms that will improve competitiveness and increase GDP? What’s mo​re important? The best solution is not a choice between these options, but all of the above.  A well balanced plan that maintains credible fiscal targets, economic reforms that promote sustained investment and hiring, and debt restructuring that produces sustainable flows should all be combined in a comprehensive plan.  Until all the elements are addressed at the same time, there will be an expectation of additional rounds of negotiations and all parties will hold back because of that.  Moreover, the sum is greater than the parts if done together, and the impact on confidence and investment would be greater. What is your experience through your cooperation with German Finance Minister Wolfgang Schäuble​,​ and how do you assess the performance of the Eurozone today? Minister Schauble is a good friend, and I deeply value the role he has played to advance US and European cooperation to build a stronger and safer world.  He and I sometimes have different macroeconomic views, but always stood together on the importance of maintaining the Atlantic Alliance and the European Union.  On matters of mutual security and protecting sovereignty, one could ask for no better partner than Minister Schauble, whether addressing Russia’s invasion of Ukraine, supporting Iraq’s economy so battlefield gains against ISIL were not lost in a weakened economy, or working together to stop terrorist financing.  In response to the refugee crisis, Germany relaxed fiscal demands, at home and through Europe, to promote an immediate and significant response. Minister Schauble was a leader within Germany to knit together east and west, at substantial economic cost, and to advance cross European cooperation, including in the areas of financial reform and resolution Europe is finally experiencing sustained economic improvement, and in my view Europe’s improved economy would be even stronger if available fiscal space was  used more fully, and this would relieve pressure to use monetary tools.  But it is also the case the Europe’s economy is much healthier than it was a few years ago. Where do you detect​ ​changes in US economic policy ​until now, following Donald Trump​’s election,​ and how is the prospect for the Transatlantic Trade and Investment Agreement being shaped? I believe that trade agreements like TTIP and TPP are very much in the interest of the United States.  High standard agreements that open markets for trade also advance progress on labor, health, environmental protection and business practices.  Since the US has historically held to high standards on our own, broadening the acceptance of high standards makes the US more competitive.  I fear that abandoning US leadership in these multilateral negotiations invites others to fill the void, with the likelihood of lower not higher standards as an outcome. The workplace is changing rapidly not just because of globalization, but even more because of advances in technology.  Our political debate tends to merge the two, perhaps because it is easier to blame the anger of an anxious public on others than it is to take a hard look inward and ask how we can address issues within our own economies. Each country and region faces its own challenges.  In the US, for example, we know that we can build a stronger foundation for economic growth by investing in our aging infrastructure, which would create good middle class jobs today and in the future.  We also know that we need to do better at education and training – for the young and not so young – so that we have skilled workers to fill jobs that are and will remain available.  We also need to maintain a responsible fiscal policy and pay for these investments, particularly with the emerging demographic challenge of an aging baby boom.  In a growing economy, we do not need big tax cuts that add to the deficit.  And in an economy where increasing shares of income go to returns on capital and highly compensated individuals, we should not roll back tax rates on the most fortunate.  We should fix a tax code that too frequently lets wealth accumulated from investments go untaxed and in a deficit neutral way reform our business tax code to eliminate loopholes and lower rates that drive businesses to leave the US. It would be reverse Robin Hood to cut health benefits for low wage workers to reduce taxes on high levels of investment income, yet that is exactly what pending legislation would do. Going forward, we will do better if the debate shifts to areas where we should be able to work together – things like rebuilding our infrastructure and training our workforce.  This would start to address the real source of the anxiety that is driving political expressions of anger.
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Former US Treasury Secretary Jack Lew will stress that fiscal improvement by Greece over the last few years lays the foundations for much needed future growth, while at the same time reiterating that reforms in the country must continue in order to attract investments. Lew’s comments are part of an interview to the Economist on the occasion of his address at a conference sponsored by the London-based media group in Athens on Monday. The conference’s title is “How fast can we grow?”, which will take place at a seaside resort southeast of Athens. The influential one-time treasury secretary in the Obama administration conceded that differences of opinion existed with the European side over macro-economic issues, while qualifying that preservation of the Atlantic alliance and the European Union was always a common position. Lew’s interview, in full: Do you detect a reverse in the course of the Greek economy? Or is it still too early? On the one hand, Grexit seems to have left the table, but on the other hand we still don’t see any growth rates that would point to a success story in Greece. Greece has clearly made progress. The most recent IMF review reflected that progress, as do measures of economic performance. After a period of better growth, the economy did flatten out, but improved fiscal conditions are a basis for better growth in the future, and a first step back into capital markets reflects that progress. Countries cannot simply cut or borrow their way to sustained growth. To reach sustained growth and improved income equality requires a balanced and disciplined approach that supports both economic demand and investment – which is why maintaining reforms and ultimately reaching an agreement on debt restructuring remain so important. With this balanced approach, Greece should be an attractive place to invest, and should see growing access to capital markets. There is still more work to be done, but with the continued determination of the Greek people and their elected government, and the ongoing cooperation of international partners, the future holds the promise of further economic improvement in this birthplace of democracy. As it emerges from the Eurogroup meeting of June 15​th in Luxembourg, the IMF will continue to participate actively in the Greek program, but will only disburse money if and when the medium term measures on the Greek debt​ are specified. How do you evaluate this development? Is it a good solution? I have long agreed with the IMF that debt restructuring is essential to achieve a long term solution that puts Greece back on a path to sustained economic growth. It is in the interest of Europe, as well as the IMF and the US, for Greece to be on an economic path that promotes domestic and geopolitical stability. I was encouraged that the Luxembourg meeting produced greater certainty that debt restructuring will be addressed, and in that context hopefully resolve the Greek financial situation so that it does not require constant revisiting. That in and of itself will help produce a better environment both for economic growth and political stability. Since Luxembourg, additional progress on the IMF review and an initial step into the private capital markets are both positive developments. In your opinion, where should the Greek side give more emphasis? On the demand for​ ​further​​ frontloaded debt relief or on the implementation of reforms that will improve competitiveness and increase GDP? What’s mo​re important? The best solution is not a choice between these options, but all of the above. A well balanced plan that maintains credible fiscal targets, economic reforms that promote sustained investment and hiring, and debt restructuring that produces sustainable flows should all be combined in a comprehensive plan. Until all the elements are addressed at the same time, there will be an expectation of additional rounds of negotiations and all parties will hold back because of that. Moreover, the sum is greater than the parts if done together, and the impact on confidence and investment would be greater. What is your experience through your cooperation with German Finance Minister Wolfgang Schäuble​,​ and how do you assess the performance of the Eurozone today? Minister Schauble is a good friend, and I deeply value the role he has played to advance US and European cooperation to build a stronger and safer world. He and I sometimes have different macroeconomic views, but always stood together on the importance of maintaining the Atlantic Alliance and the European Union. On matters of mutual security and protecting sovereignty, one could ask for no better partner than Minister Schauble, whether addressing Russia’s invasion of Ukraine, supporting Iraq’s economy so battlefield gains against ISIL were not lost in a weakened economy, or working together to stop terrorist financing. In response to the refugee crisis, Germany relaxed fiscal demands, at home and through Europe, to promote an immediate and significant response. Minister Schauble was a leader within Germany to knit together east and west, at substantial economic cost, and to advance cross European cooperation, including in the areas of financial reform and resolution Europe is finally experiencing sustained economic improvement, and in my view Europe’s improved economy would be even stronger if available fiscal space was used more fully, and this would relieve pressure to use monetary tools. But it is also the case the Europe’s economy is much healthier than it was a few years ago. Where do you detect​ ​changes in US economic policy ​until now, following Donald Trump​’s election,​ and how is the prospect for the Transatlantic Trade and Investment Agreement being shaped? I believe that trade agreements like TTIP and TPP are very much in the interest of the United States. High standard agreements that open markets for trade also advance progress on labor, health, environmental protection and business practices. Since the US has historically held to high standards on our own, broadening the acceptance of high standards makes the US more competitive. I fear that abandoning US leadership in these multilateral negotiations invites others to fill the void, with the likelihood of lower not higher standards as an outcome. The workplace is changing rapidly not just because of globalization, but even more because of advances in technology. Our political debate tends to merge the two, perhaps because it is easier to blame the anger of an anxious public on others than it is to take a hard look inward and ask how we can address issues within our own economies. Each country and region faces its own challenges. In the US, for example, we know that we can build a stronger foundation for economic growth by investing in our aging infrastructure, which would create good middle class jobs today and in the future. We also know that we need to do better at education and training – for the young and not so young – so that we have skilled workers to fill jobs that are and will remain available. We also need to maintain a responsible fiscal policy and pay for these investments, particularly with the emerging demographic challenge of an aging baby boom. In a growing economy, we do not need big tax cuts that add to the deficit. And in an economy where increasing shares of income go to returns on capital and highly compensated individuals, we should not roll back tax rates on the most fortunate. We should fix a tax code that too frequently lets wealth accumulated from investments go untaxed and in a deficit neutral way reform our business tax code to eliminate loopholes and lower rates that drive businesses to leave the US. It would be reverse Robin Hood to cut health benefits for low wage workers to reduce taxes on high levels of investment income, yet that is exactly what pending legislation would do. Going forward, we will do better if the debate shifts to areas where we should be able to work together – things like rebuilding our infrastructure and training our workforce. This would start to address the real source of the anxiety that is driving political expressions of anger.

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