Courtesy of the embassy of the republic of Cyprus

Ewa Boniecka: Cyprus has taken over the six-month rotating presidency of the EU Council at a time when it is encountering major financial problems. How bad is Cyprus’ financial situation and what kind of help are you hoping for from the EU?

Andreas Zenonos: Certainly Cyprus is facing some financial and economic difficulties, but we are not in such a bad situation as some foreign media make us out to be. Let me point to the specific situation of Cyprus in order [for you] to understand the present economic problems.

Stable and optimistic-looking economic growth which began in the late 1960s was abruptly interrupted in 1974, by the Republic of Turkey’s military invasion, occupation and forceful expulsion of the Cypriot people from their homes, business and properties. This invasion and occupation of 36.2 percent of our territory resulted in a loss of 70 percent of the country’s total gross economic output, to the creation of an overnight unemployment rate of 50 percent and, worst of all, to a situation where one-third of the total population was homeless.

From the economic point of view therefore, the areas that Turkey has taken from Cyprus are the most fertile ones. Under these circumstances, it was imperative to have a new economic strategy for Cyprus, whereby more emphasis was put on the development of the secondary and tertiary sectors. Between the late 1970s and 2007, Cyprus experienced a period of high levels of economic growth. ... In 2007, the €17 billion Cypriot economy closed with a budget surplus of €505.5 million, representing a surplus of 3.5 percent in terms of gross domestic product, while public debt was below 60 percent of GDP.

In addition to these sound public finances, Cypriot consumers had at their service a large banking sector, from which they could easily acquire a loan. ... Unfortunately, the two largest Cypriot banks invested more than €2 billion in Greek government bonds, which, following the “Greek haircut,” they lost.

Being €2 billion short overnight left Cypriot banks with serious liquidity deficits and, as a consequence, their ability to continue providing consumer and business loans was impaired. As a result, there has been a fall in the purchasing power of Cypriot consumers, a fall in economic activity, an increase in the number of small and medium businesses which have closed down, a fall in consumption and a rise in unemployment from approximately 3 percent in 2007 to 11 percent today.

In order to re-capitalize the banks and re-inject the economy with liquidity, the Cypriot government has asked for financial assistance and hopes to receive it with conditions which will not be counter-productive to the objective of creating economic growth and jobs. Now the Cypriot authorities are negotiating with the International Monetary Fund, the European Central Bank and the European Commission about the amount of a possible loan.

Brussels is irritated that Cyprus has also turned to Russia for a credit line. There are accusations that your banks are helping Russians “to launder dirty money.” what is your reaction to these claims, and how you would define Cyprus’ relations with Russia?

Since Cyprus gained its independence in 1960, relations with Russia have developed very quickly in all spheres, just as they have done with many other countries. Today, relations with Russia are very close in all spheres: economic, educational, cultural and political.
Cyprus is a tourist destination for tens of thousands of Russian citizens each year while for the last five decades, Russian universities have provided tertiary education to thousands of Cypriot citizens. Relations between Cyprus and Russia are characterized by political trust and we are proud of that. Regarding the potential Russian loan, I would like to reverse the question: If the Russian government is ready to grant a loan to Cyprus with a lower interest rate than the EU, should the Cypriot government reject such a loan?

As regards the “dirty money” that you mentioned, it is not for me to comment on the business activities of private individuals from other countries. The Republic of Cyprus is a full member state of the EU and on this issue, as well as on all other issues, follows and implements the values and laws of the EU. We are not a tax haven and we all know which countries are tax havens.

The Cypriot government has said that the problem of the division of the island and relations with Turkey will not interfere with the presidency of the EU. Nonetheless, the issue remains, so what is the outlook for solving it?

We treat the military occupation and criminal colonization of one-third of our country by ... Turkey, as a separate issue from our EU presidency. Despite threats and statements by the leadership in Ankara about freezing relations with the EU presidency during the second half of 2012, our policy will be to fully support Turkey’s European aspirations provided that, as a candidate country, it fully respects and fulfills all of its obligations vis-ą-vis the EU. … It is important to remember that the efforts to solve the Cyprus problem are undertaken within the framework of the United Nations and not in the European Union. We are ready to continue negotiations to reunite the island in parallel with our EU presidency.

Let me point out that it is in our interest that Turkey transforms itself into a truly democratic state that solves its differences with other countries through civilized dialogue and not through military invasions, occupations and ethnic cleansing. However, at the end of the day, Turkey’s future is in its own hands and it will have to end its military occupation of Cypriot territory if it wants to accede to the EU.

Let’s turn to the priorities of the Cypriot presidency. What are they?

First of all, our motto is “Towards a better Europe,” meaning a Europe closer to its citizens, its neighbors and the world.

In internal EU issues, the main priorities of the Cypriot Presidency of the Council of the European Union include (a) successfully concluding negotiations for the next EU Multiannual Financial Framework for the years 2014-2020 with emphasis on economic, social and territorial cohesion, (b) reforming the Common Agriculture Policy and the Common Fisheries Policy, (c) promoting the issue of EU Energy security, (d) reaching an integrated Maritime Policy, (e) achieving a Common Asylum System and (f) deepening the EU internal market and removing its remaining barriers.

In external issues, the main priorities of the Cypriot presidency include (a) promoting the EU’s relations with the Southern Neighborhood, (b) enlargement and (c) food security.

Cyprus, as a big international maritime center, wants to push forward the development of an integrated EU maritime policy. Also very important is the development of a cohesion policy in the framework of the next EU budget. What is your perspective on these issues?

On October 8, 2012, we will be hosting an informal Ministerial Meeting on EU Integrated Maritime Policy, in Cyprus. The EU Integrated Maritime Policy is an important tool in meeting the objectives of the Europe 2020 Strategy and Cyprus is ready to contribute and cooperate with the European Commission in this direction.

Cyprus sees potential for an EU Integrated Maritime Policy. ... We believe that the maritime sector and maritime-related activities are very important for the economy and can add value to economic development and job creation in the European Union. And the cohesion policy is a very important factor of the whole EU budget and we have to discuss how to maintain it.

Are you optimistic that all these matters will be dealt with successfully during this present financial crisis?

I will rather use the word “realistic” towards setting the shape of the next EU budget. We are continuing discussions about it and, as president, we have to present the report on ongoing negotiations and this has to be followed by the decisions of all member states at the end of December.

In spite of the present financial crisis, we have to hope for the best and to find a consensus about the shape of the budget, gathering into it all of the required elements, including cohesion policy. It is not a budget for one member state – richer or poorer – but for the whole European Union in the coming years.

I am not a prophet, but I think that if we deeply evaluate the roots of the economic crisis and look at the European situation in a global framework and try to find solutions without egoism, we will mobilize all members and citizens to participate in decisions leading us out of the crisis and look at the EU as our common future not only through the eyes of European technocrats but through the eyes and aspirations of ordinary people.

What political impact did last April’s visit of Prime Minister Donald Tusk to Cyprus have on bilateral relations between Cyprus and Poland?

The visit of Prime Minister Tusk to Cyprus last April gave an impetus to bilateral relations and to [the examination of] new areas of potential cooperation.

The visit was an opportunity for the two heads of government to discuss regional, international and European issues. It also gave the two leaders a face-to-face meeting at which they discussed cooperation within the framework of our common 18-month Trio Presidency Program. Generally speaking, our cooperation in the Trio during the months prior to the preparation of the Trio Program brought us closer together and made us better understand each other’s positions and sensitivities.

Why is economic cooperation between Poland and Cyprus so small?

It is true that our bilateral trade is not as high as we would like it to be. It is for this reason that in 2006, we set up a Commercial Center in our Embassy and I am pleased to say that since then the value of Cypriot exports to Poland have increased from €2.6 million in 2007 to €3.7 million in 2011.

The main Cypriot exports to Poland include potatoes, Halloumi Cheese, fruit, vegetables, nuts and pharmaceuticals. In the context of our efforts to increase exports even more, we organized two Cyprus-Poland business forums in Poland last year and are planning to organize one more this year.

Polish exports to Cyprus, on the other hand, were valued at €34.8 million in 2011 and I think that is satisfactory, if you consider the small size of the Cypriot market. Polish exports to Cyprus include furniture, lamps, mattresses, tobacco, electrical products and mechanical products.