Alina Tryfonidou, Neapolis University Pafos (Cyprus)
BRIDGE Network Country Report
- Crisis Impact and Response
As a result of the global financial crisis which emerged following the US subprime mortgage crisis of 2007-2008, the Cypriot economy went into recession in 2009 with its economy shrinking by 1.67%. In the years that followed, the economy was further weakened by rising unemployment, weak economic growth which failed to rise to the pre-2009 levels, and commercial property values which saw a decline by approximately 30%. The major crisis, however, came in 2012 – and was, essentially, a private sector debt (banking) problem: the 2012 writedown of privately held Greek debt exposed the Cypriot banking system’s fragility whilst it led to more than €4 billion in losses for Cypriot banks who had invested heavily in Greek bonds and led to the collapse of the second biggest bank of the island (Cyprus Popular Bank). Public finances were also deteriorating, with the debt-to-GDP ratio in 2012 being at 80% and the Cypriot government debt getting junk status. As explained in a European Stability Mechanism (ESM) publication “With a banking sector that was then about six and a half times the size of the country’s economy, it was virtually impossible for Cyprus to overcome this blow on its own.” It was in the summer of 2012 that Cyprus finally requested eurozone aid and following months of talks with the Eurogroup, which stalled by January 2013, and a change of Government in Cyprus in February 2013, matters came to a head at a meeting on 15 March 2013. The Eurogroup agreed to provide up to €10 billion to Cyprus in exchange for the downsizing of the banking system, the tightening of the government’s budget, steps to fight money laundering and the modernisation of the financial supervisory framework (“The Cypriot Programme” (2013-2016)). The agreement also provided for a (highly controversial and unprecedented) bail-in of all bank creditors (the so-called “hair-cut tax on deposits”), who, overnight, lost 6.75% of their (guaranteed) deposits under €100,000 and 9.9% of deposits over €100,000. In March 2016, Cyprus exited its programme on schedule, with the ESM itself hailing the programme as a success.
Although much of the rest of the EU has left the migration crisis of 2015 behind, the effects of the crisis are still very much felt in the Republic of Cyprus, an island nation in the eastern Mediterranean Sea whose nearest neighbors are Turkey, Syria, and Lebanon. Cyprus is struggling with rising numbers of asylum seekers while being accused of poor refugee integration and xenophobia and of summarily pushing back, abandoning, expelling or returning migrants, refugees and asylum seekers without giving them the opportunity to lodge asylum claims. Cyprus “has proved to be a vexing loophole”, according to the New York Times, due to its de facto division by the Green Line (see below) which makes it easy for migrants to enter into EU territory through the Turkish-occupied north of the island, without crossing an external EU border. The number of asylum seekers in Cyprus was five times higher in 2019 than it was in 2015, and data released by the EU demonstrate that Cyprus is the top receiving country of refugees in the EU (by share of the country’s population). This has given rise to a recent shift in the Government’s approach towards a more restrictive migration policy implemented through repressive measures which include tougher border restrictions and fewer rights within the reception process, which, it has been argued, is highly problematic from a human rights perspective.
- Rule of Law Crisis
The latest European Commission Report on the rule of law situation in Cyprus was published in July 2021. The Commission’s Reports on the rule of law – which are published for each Member State on a yearly basis – examine four issues which relate to the situation of the rule of law in each country (reform of the justice system; corruption; freedom of expression and the right of access to information; the system of checks and balances). Here, I shall focus on corruption.
In the 2020 Transparency International Corruption Perception Index Cyprus was ranked 42nd globally and 14th in the EU. Moreover, in the Special Eurobarometer on Corruption, published in 2020, 95% of respondents from Cyprus (compared to 71% which was the EU average) stated that they consider corruption to be a widespread problem and 60% of the respondents from Cyprus (compared to 26% which was the EU average) stated that they feel personally affected by corruption in their daily lives. In fact, the problem of corruption in Cyprus came centre stage in 2020, as a result of the revelations made by Al Jazeera’s Investigative Unit in August 2020 – the so-called “Cyprus Papers” – which consisted of leaked documents revealing that the Republic of Cyprus provided citizenship through investment through its golden passports scheme to several people linked to crime and corruption. This was followed by a second Al Jazeera video in October of the same year in which undercover Al Jazeera reporters filmed Cypriot officials – including the Parliament speaker – using the golden passports scheme to assist a fictional Chinese businessman with a criminal record. As a result of the above developments, in the same month, the Speaker of the Cypriot Parliament resigned and Cyprus abolished its lucrative citizenship by investment scheme, in respect of which there is a currently pending EU infringement action against Cyprus.
As a (broader) response to the above issues, at the end of October 2020, the President of the Republic, Nicos Anastasiades, announced that a number of measures aiming to tackle and investigate corruption would be put forward in the coming months. On 29 January 2021, the Cypriot President and the (then) Minister of Justice announced new measures to combat corruption, which are based on the three pillars of the “rule of law, transparency and accountability”. The measures include a reform of the judicial system and the penal code, the promotion of bills that allow for the confiscation of illegal proceedings, the prohibition of entities from taking part in public procurement if they have been prosecuted for illegal acts, the enhancement of the internal control mechanisms in the Ministries and a bill that provides for transparency in the financial assets of government officials. Moreover, a draft bill which provides for the establishment of an “Independent Body against Corruption” and the protection of whistle-blowers will be forwarded to the plenary session of the House of Representatives to vote. Reflecting on these, in its latest Report on the rule of law situation in Cyprus, the European Commission noted that “Cyprus continues to improve its legislative framework to combat corruption, although a few important reforms remain pending, such as setting up an anticorruption agency, protection of whistleblowers, regulation of lobbying and asset disclosure for elected officials”.
Cyprus and the UK have long historical ties which date back to the 19th century and which pre-date the accession of both countries (1973 for the UK and 2004 for Cyprus) to the EU. Cyprus is an ex British colony, a member of the Commonwealth, as well as a country where the UK maintains military bases (see below). The UK is also a signatory to the Treaty of Guarantee and the Treaty of Establishment of the Republic of Cyprus signed in 1960 and through which the Republic of Cyprus was established. Today, the two countries maintain close links in the political, economic and cultural fields. As will be explained below, the UK maintains two Sovereign Base Areas (SBAs) in Cyprus which it uses as military bases. It is, also, one of the guarantor powers of the independence and territorial integrity of Cyprus and, thus, it is committed to a comprehensive, just and lasting settlement of the Cyprus problem. According to the website of the High Commission of Cyprus in the UK, it is estimated that there are around 270,000 Cypriots living in the UK, thousands of Cypriot students are enrolled in British universities every year, whilst there are between 25,000 and 30,000 British citizens living in Cyprus. Data collected by the Cyprus Statistical Service indicates that Britons represent a third of the overall number of tourist arrivals to Cyprus and the UK is consistently the top country from which tourists in Cyprus arrive. The UK is, also, consistently one of Cyprus’s most significant trading partners: according to the Cyprus Statistical Service, in 2019, the exports of Cyprus to the UK were worth €187.2 million whereas the UK exports to Cyprus were €577.4 million. Moreover, the website of the High Commission of Cyprus in the UK points out that the UK is the most important partner in services for Cyprus, of a total value of more than €2 billion (in 2017).
The UK withdrew from the EU on 31 January 2020 and the transition period ended on 31 December 2020. Brexit has, thus, coincided with the Covid-19 pandemic. Accordingly, although Cyprus has been identified as one of the EU Member States that will be affected the most by Brexit, the impact of the latter on Cyprus and, in particular, on the Cypriot economy, is, still, impossible to assess as a result of the fact that the severe impact that the pandemic has had on trade and the global economy has overshadowed any other factors that may have led to reduced trade and economic decline. Nonetheless, Brexit has had a number of immediate consequences for Cypriot nationals having – or interested in establishing – links with the UK. As a result of Brexit, British and Cypriot nationals no longer have the right to move freely between the UK and Cyprus, which had derived from the Treaty on the Functioning of the European Union (TFEU), as the UK is no longer an EU Member. In practice, this affects British nationals who would like to move to Cyprus – or Cypriot nationals wishing to move to the UK – on a long-term basis, as their right to do so is no longer automatic (deriving from EU law) but, rather, depends on the immigration laws of the two countries. On the other hand, given that – to date – neither of the two countries has introduced visa requirements for tourists coming from the other, it is likely that tourism between the two countries will not be (negatively) affected. Nonetheless, Cypriot students who study at UK universities no longer enjoy a reduced-fee status and interest-free loans to which they were entitled while the UK was an EU Member State. Thus, it is likely that studying at a UK university is no longer financially feasible for many who will, as a result, be looking for alternative options either in Cyprus or in other EU countries.
- Differentiated Governance
- Policy Differentiation
Cyprus participates in a number of policy fields where groups of Member States have adopted a form of closer cooperation. Cyprus was one of the first three 2004 enlargement states that joined the Eurozone (the other two were Slovenia, which was the first to join the Eurozone in 2007, and Malta, that joined the Eurozone in 2008 together with Cyprus). It is also one of the 22 Member States that have joined the European Public Prosecutor’s Office (EPPO).
Nonetheless, to this day, Cyprus continues not to be a member of the Schengen area, even though it applied for Schengen membership in September 2019. The main difficulty lies in the persisting de facto division of the island as a result of the unlawful Turkish occupation of the north of the island since 1974 and the continued existence of the Green Line (see below) which – as will be explained subsequently – is not recognised as an external border of the EU. Given the importance – for the Schengen zone – of ensuring the effective management of the EU’s external borders, the maintenance of the Green Line creates a real conundrum for the EU as – if Cyprus joined the Schengen area – it would bring within the Schengen zone areas which are not effectively controlled by an EU Member State and, thus, part of the EU’s external borders would not be effectively managed. Accordingly, it came as no surprise that in June 2021, the Home Affairs Commissioner Ylva Johansson stated that Cyprus is not yet ready to enter the Schengen area.
- Territorial Differentiation.
There are two aspects of territorial differentiation in Cyprus that have led to differentiated EU governance and, more specifically, the partial application of the EU acquis in certain parts of the island.
- The first is that since 1960 when, with the Treaty of Establishment, Cyprus gained its independence from the UK and became the Republic of Cyprus, the UK maintains two military bases on the island – the SBAs of Akrotiri and Dhekelia.
Cyprus joined the EU in 2004, whereas the UK was an EU Member State from 1973 until 2020. Therefore, when Cyprus joined the EU, the status of the SBAs under EU law needed to be determined given that they were territories of one EU Member State (the UK) which were situated in another EU Member State (Cyprus).
The SBAs are a British Overseas Territory and – for the purposes of EU law – they benefit from a specific status with respect to the territorial scope of application of the EU Treaties. This is reflected in Article 355(5)(b) TFEU which provides that the EU Treaties “shall not apply to the United Kingdom Sovereign Base Areas of Akrotiri and Dhekelia in Cyprus except to the extent necessary to ensure the implementation of the arrangements set out in the Protocol on the Sovereign Base Areas of the United Kingdom of Great Britain and Northern Ireland in Cyprus” (i.e. Protocol 3 annexed to the 2003 Act of Accession of the 2004 enlargement states). The Protocol provides that the SBAs are included within the Union customs territory and that the EU measures in the fields of customs, indirect taxation and the common commercial policy in relation to goods entering or leaving the island through a port or airport of the SBAs are applicable. Moreover, it provides that the land and sea boundaries of the SBAs with the Republic of Cyprus are not deemed external borders of the Union, meaning that the Republic of Cyprus does not have to carry out checks on persons crossing these areas, and neither do the EU restrictions on the crossing of external borders apply to these areas. The UK, nonetheless, guarantees to exercise controls on persons crossing the external borders of the SBAs in accordance with the EU rules on the restriction on the crossing of external borders. This rather exceptional status of the SBAs under EU law has been maintained following Brexit, as is reflected in the Protocol on SBAs which is attached to the UK’s Withdrawal Agreement.
- The second aspect is the “Cyprus problem” which involves the dispute between the Republic of Cyprus and Turkey over the northern part of the island. In particular, the territory of the Republic of Cyprus in the north of the island is not controlled by the government of the Republic as a result of the 1974 Turkish invasion which brought around 35.2% of the island under unlawful Turkish military occupation. Protocol 10 on Cyprus attached to the 2003 Act of Accession of the 2004 enlargement provides for the suspension of the EU acquis in the parts of the island which are not controlled by the government of the Republic of Cyprus (Article 1(1) of the Protocol). Although one might take this as indicating that there is complete non-application of the acquis in the Turkish-occupied areas of the island, nonetheless, due to a number of measures adopted by the EU institutions and which are based on provisions of the above Protocol there is, in fact, in this context as well, partial application of the EU acquis in the said areas.
Article 2(1) of Protocol 10 on Cyprus provides that “The Council, acting unanimously on the basis of a proposal from the Commission, shall define the terms under which the provisions of EU law shall apply to the line between those areas referred to in Article 1 and the areas in which the Government of the Republic of Cyprus exercises effective control”. This has led to the promulgation of the so-called Green Line Regulation, which sets out the terms under which persons and goods can cross the “Green line” separating the non-government-controlled areas of the island from the government-controlled ones. It is important to emphasise here, nonetheless, that the Green Line does not constitute an external border of the EU and that the Regulation simply establishes special rules for the crossing of the line by persons and goods without recognising any authority on the island other than the only internationally recognised government of the Republic of Cyprus. In addition, the Financial Aid Regulation – based on Article 3 of Protocol 10 on Cyprus which provides that nothing shall preclude measures with a view to promoting the economic development of the non-government-controlled areas – has established a financial aid programme, implemented by the European Commission, which aims to facilitate the reunification of Cyprus by encouraging the economic development of the Turkish Cypriot community.
- Covid-19 and the Recovery Fund
In March 2020, Cyprus was the last of the 27 EU Member States to report its first confirmed Covid-19 cases. The first two cases concerned Cypriots who had returned from travelling abroad (the UK and Italy). A number of cases were confirmed in the subsequent days and the numbers continue to rise to this day, with 119,230 confirmed cases being reported as of 22 September 2021.
The Republic of Cyprus introduced its first nationwide lockdown on 24 March 2020. This was a strict lockdown, similar to the one introduced in other EU countries such as Greece and Italy. Individuals were banned from leaving their homes unless they had to for specific reasons (e.g. trips to pharmacies, supermarkets, to exercise or to walk their dog, or essential work). All public spaces and all private businesses were closed and all commercial flights to and from the two operating airports of the Republic of Cyprus (Larnaca and Paphos) were suspended. Cargo and humanitarian flights were permitted whereas only Cypriot citizens/residents and their families could fly into Cyprus but they were required to spend two weeks in quarantine at hotels designated and funded by the Cypriot government. Although the first full lockdown ended on 21 May 2020, some restrictions (especially relating to travelling) remained throughout the summer and early autumn. However, by November 2020 another (albeit partial) lockdown was announced. Nonetheless, this had failed to curb the spread of the virus and as a result of this a new, full, lockdown began in January 2021. By March 2021, restrictions began to be eased despite a spike in infections and have been further eased in recent months as a result of the Covid-19 vaccines roll-out and the introduction of the SafePass.
Although there is misinformation about the safety of the vaccines (spread, mainly, through social media) which has prevented a part of the population from being vaccinated, Cyprus has generally done well in terms of vaccination uptake. According to the ECDC Vaccine Tracker, as of 22 September 2021, 63% of the total population of Cyprus has been fully vaccinated, which amounts to 76.2% of the adult population of the country. In September 2021, vaccination of specific population groups with the 3rd Covid-19 vaccine dose began.
As regards the recovery fund (NextGenerationEU), which is an EU economic recovery package (worth €806.9 billion) to support EU Member States hit by the Covid-19 pandemic, Cyprus’s recovery and resilience plan was presented by the Minister of Finance of Cyprus in May 2021, and was endorsed by the European Commission in July of the same year. With this the EU agreed to disburse a total of €1.2 billion in grants and loans under the Recovery and Resilience Facility which will support the implementation of the investment and reform measures outlined in Cyprus’s plan. This will play a key role in enabling Cyprus to emerge stronger from the COVID-19 pandemic. On 9 September 2021, the Commission disbursed €157 million to Cyprus, equivalent to 13% of the grant and loan component of the country’s financial allocation. The Commission is expected to authorise further disbursements based on the implementation of the investments and reforms outlined in Cyprus’s recovery and resilience plan.
- Conference on the Future of Europe
In Cyprus, the (official) inaugural event through which the Conference on the Future of Europe was launched took place on 1 June 2021 and was organised by the General Secretariat for European Affairs at the Ministry of Foreign Affairs of the Republic of Cyprus in association with the European Commission Representation and the Office of the European Parliament in Nicosia. There have, also, been a handful of events organised by Cypriot universities which have either consisted, exclusively, of academic discussions around this topic or which have had as their aim to educate the public. The media have also published information regarding the process and encouraging citizens to get involved, though the matter is, clearly, treated as of secondary importance. The European Parliament Office in Cyprus and the European Commission Representation in Cyprus have played an active role in educating the public and their respective Heads have appeared in the print media and on national television for this purpose. To date, however, there does not appear to be much mobilisation on the part of Cypriot citizens or Cypriot NGOs on the matter, and it is not surprising, therefore, that the Conference on the Future of Europe map does not include any online or in-person events organised on the island.
 For an analysis of the factors that led to the economic crisis in Cyprus in 2012-2013 see S. A. Zenios and E. Panayi, “Was the Cyprus crisis banking or sovereign debt?” (2015) 10 Banks and Bank Systems 23 (https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/6699/BBS_en_2015_02_Zenios.pdf).
 For an analysis of the (partial) application of EU law to the SBAs in Cyprus see S. Laulhé Shaelou, “The Principle of Territorial Exclusion in the EU: SBAs in Cyprus – A Special Case of Sui Generis Territories in the EU” in D. Kochenov (ed.), EU Law of the Overseas: Outermost Regions, Associated Overseas Countires and Territories, Territories Sui Generis (Kluwer, 2011). For an explanation of the legal status of the SBAs in Cyprus see K. Chrysostomides, The Republic of Cyprus: A Study in International Law (Brill, 2000), pp. 77-91.
 For an explanation of the impact of Brexit on the status of the SBAs see N. Hadjigeorgiou and N. Skoutaris, “The Status of the Sovereign Base Areas in Cyprus following Brexit” PRIO Occasional Paper Series 3 (2019), available at https://www.prio.org/utility/DownloadFile.ashx?id=1777&type=publicationfile; and G. Kentas, “A Critical Assessment of the Cyprus Protocol Annexed to the UK’s Withdrawal Agreemetn: The Consensual Continuation of a Metacolonial Realm” (2018) 30 The Cyprus Review 317.
 For an explanation of this see N. Skoutaris, “The Status of Northern Cyprus under EU Law: A Comparative Approach to the Territorial Suspansion of the Acquis” in D. Kochenov (ed.), EU Law of the Overseas: Outermost Regions, Associated Overseas Countries and Territories, Territories Sui Generis (Kluwer, 2011).
 Regulation 866/2004 on a regime under Article 2 of Protocol 10 to the Act of Accession  OJ L 206/128. For an nanalysis of the Regulation see N. Skoutaris, “The Application of the Acquis Communautaire in the Areas not under the Effective Control of the Republic of Cyprus: The Green Line Regulation” (2008) 45 Common Market Law Review 727.
 Regulation 389/2006 establishing an instrument of financial support for encouraging the economic development of the Turkish Cypriot community and amending Council Regulation 2667/2000 on the European Agency for Reconstruction  OJ L 65/5.