The main argument in favour of membership is a political one. Accession is desirable for mainly two reasons: firstly, to gain leverage on Turkey and secondly to provide a wider framework for the solution of the Cyprus problem. For instance, the membership of Cyprus would establish direct links with Brussels, thus alleviating the fears of the Turkish Cypriot Community of "overdependence" on the Greek Cypriot Community. Furthermore, the rights of both Cypriot Communities can be safeguarded and better protected within a supernational, strong and democratic EU.

EU membership will bring challenges and new opportunities. Loans and grants will be made available to Cyprus for industrial, environmental and various other projects. There will be an increased flow of capital in the form of direct investments, as well as in the form of technology and know-how. Moreover and with the expectation that Cyprus will be able to accommodate and facilitate the changes, the accession will not create unsurpassable problems.

However, the expected overall economic benefits of the accession are uncertain. Although the trade deficit of Cyprus with the EU has declined and with regard to services even shows a surplus, the experience gained over the last 2 decades raises certain scepticism, about the benefits of the EU membership. The reasons are as follows:

  • There is a lack of any optimistic trade forecast for improvement in the substantial deficit of the trade balance of Cyprus with the EU which has materialised during the agreement and protocol period over the last 2 decades.
  • The healthy surplus with regard to services and generally the extensive business opportunities available in the open global market, (in particular the Middle East and Eastern European markets), are highly likely to be affected adversely.
  • The inability of the Cypriot producers to penetrate the EU markets due to the high competition, high wages, lack of innovation and long term strategy.
  • The overdependance of the Cyprus economy on tourism which is a highly competitive industry, both in terms of quality and price. The introduction of strict European regulations relating to hotels, restaurants and tourism generally, will make things more difficult for Cypriot tourist entrepreneurs to compete within the industry. On the other hand, tourism in Cyprus may not benefit because tourist destinations are not subject to trade preferences, and any future increase of tourist trade is unlikely to be affected directly by membership to the EU.
  • The labour market and industrial relations which are fairly well maintained and balanced to date, could be upset and result in industrial conflicts, low paid jobs and decreasing performance and productivity.
  • There are serious concerns that EU membership which will lead to the harmonisation of regulations relating to banking and other services, will inevitably adversely affect the offshore sector. This sector is the most flourishing sector of the Cyprus economy and, if impaired, will lead to severe repercussions on the economy of Cyprus.

CAUTION: The information in this article is subject to change without notice. Application of the information to specific circumstances requires the advice of lawyers who must rely upon their own sources of information before providing advice. The information in this article is intended only as a general guide and is not to be relied upon as the sole basis for any decision without verification from reliable professional sources familiar with the particular circumstances and the applicable laws in force at that time.

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