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[Agios Amvrosios]

Annan plan: a recipe for economic disaster?

By Andreas Theophanous

Cyprus Mail 16 November 2002

THE economic dimension of a solution to the Cyprus problem will without doubt be of vital importance for the viability of the state. Thus economic factors, in the broadest meaning of the term, should be seriously taken into account in the examination of any solution model.

The expected economic aid package from the EU is acknowledged but it is more important that there should be internal dynamics for reconstruction and further development. And likewise, the return of territory is significant, but the proposed Annan plan should be assessed comprehensively; in other words, we should not lose sight of the forest for the tree. Within this framework it should be noted that ignoring fundamental rules for the smooth functioning of the economy will have serious consequences, and at first sight it seems that the Annan plan does not take economic factors into serious consideration.

The constitutional framework of a state decisively affects the economic structure and consequently economic performance. Economic structure includes, among other things, the decision-making mechanisms and processes, the relations between the private and public sectors, the legal framework that regulates economic activity, the taxation system, public expenditure, the relations between employers and trade unions, the tripartite co- operation on labour matters (employers - trade unions - the state) and so on.

It is equally important to make sure that there are no distortions in the economy. Thus, among other things, government expenditure as a percentage of GDP is a significant indicator that inevitably and undoubtedly affects economic structure and performance. For 2002, the above-mentioned indicator in the government-controlled area of the Republic of Cyprus is approaching 40 per cent. In case the Annan plan and the three-state structures that he proposes are implemented, government spending will rise sharply.

If we fail, for any reason, to take into account basic rules for the smooth functioning of an economy, there will be unpleasant surprises. For example, if we allow the public expenditure/GDP indicator to approach, let alone exceed, 50 per cent it will be an ill-omened beginning for the new state with gloomy prospects.

Such a development would dynamite the Cyprus economy with unforeseen consequences. The ill feeling and discontent that will result from the implementation of an unacceptable political system burdened with serious economic problems will constitute a highly explosive mixture.

Justifiably, one wonders whether it is wise to ignore the tremendous costs of running three state structures as well as the consequent problems, including cases of deadlock that would most likely arise owing to inflexible decision-making mechanisms. We should also be concerned about the prospects of success in bringing about convergence in the standard of living of the two communities without the unimpeded functioning of market forces. With fundamental distortions in the functioning of the free market system (i.e. no implementation of the three basic freedoms) the whole attempt for convergence will parallel the story of Sisyphus' punishment.

Finally, it must also be noted that Cyprus's course of acceding to the Eurozone will also be affected adversely. If the country's economic performance is allowed to be derailed because of the problems stated above (and they are not the only ones) then the value of the Cyprus pound will fall and there will be great delay in joining the Eurozone.

A flexible economic structure will have a positive affect on the economy, whereas an inflexible, distorted structure, as outlined in the plan, will have a negative effect on the economy. Examples of inflexibility and distortion in economic systems have been the USSR and Czechoslovakia; both of these systems collapsed from within.

Andreas Theophanous is a Professor of Political Economy and Director General of the Research and Development Center - Intercollege

[MicAtCyp]

Ayie I agree, but why so many topics re aderfe?You know I tooka leave of absense from this forum for this reason.
I think I will go on holidays again.

Oh, I forgot, nice to meet you in this forum

[insan]

Ayie I agree, but why so many topics re aderfe?You know I tooka leave of absense from this forum for this reason.
I think I will go on holidays again.

Oh, I forgot, nice to meet you in this forum

Weird. You didn't welcome a similar personality Kelebek, such happily. A discriminative bahaviour or what?

[MicAtCyp]

Weird. You didn't welcome a similar personality Kelebek, such happily. A discriminative bahaviour or what?

Are you sure? Read the following copy then.

Why are you so frightened of Turkish settlers?

Welcome butterfly!
Because they were donated our properties, and we want them back. And because after we get them back they will be living in the streets. That's why we want them to go back where they came from. Unless of course you want to send you some in Santa Clara.

For your information I liked Kelebek (and Alasya of course) very much, did not consider her extremist and I was very sorry she was banned.

Much to my surprise all you TCs labeled her extremist. You personally told her we need her here to balance Piratis. Is Piratis an extremist?!

PS. Kelebek means "butterfly".

[insan]

Much to my surprise all you TCs labeled her extremist. You personally told her we need her here to balance Piratis. Is Piratis an extremist?!

I didn't label Kelebek extremists. I found its posts similar with the Piratis'.

[boulio]

and Alasya of course

i think he is taking about alasya,insan

[insan]

I also didn't label Alasya as an extremist. I was getting well with her...

[brother]

Micatcyp
How do you know kelebek was banned, i never saw that advertised anywhere on the forum?

[MicAtCyp]

You didn't welcome a similar personality Kelebek....

I didn't label Kelebek extremists. I found its posts similar with the Piratis'

Ayios is similar to Kelebek, Kelebek is similar to Piratis do you mind telling us what exactly is the similarity you see between Ayios-Kelebek and Piratis?

[MicAtCyp]

How do you know kelebek was banned, i never saw that advertised anywhere on the forum?

I am the admin re, never you heard?