Euro or TL following settlement?

[waddo]

Collective thoughts on this please from all the financial experts, European Union experts, conditions of a settlement experts and anyone with a comment on THIS subject.

Having no financial background (apart from being an expert in having no money) and no love for the EU whatsoever along with everyone else who has no definitive knowledge of what the "proposed" settlement agreement is based upon - these are my thoughts..........

It looks like the settlement would be a bi-zonal federation. The federated North (FN) and the federated South (FS), each with a 50/50 say (I also believe in fairy's) in the running of the Island.

The current situation regarding the EU membership of the FN would be lifted and the FN would enjoy(?) all of the benefits of the EU that the SN currently enjoy - like EU Central Bank (EUCN) handouts and such.

As the TRNC (at this moment) have stated that no settlement will be reached unless the RoC agrees that Turkey will remain as a protecting power to the FN and as Turkey itself will gain a large boost towards its own EU membership by helping to solve the current North/South problem, it could be expected that the FN would remain financially bound to the Turkish Lira until such time as Turkey joined the EU and changed over to the Euro.

Why? The FS will remain in financial difficulties for some time to come - regardless of the oil/gas equation. The EUCN would not wish to have to immediately bail out a new FN who, upon joining the EU fully, went suddenly belly up due to still owing Turkey millions of TL from previous loans.

OK, thoughts please from the more educated???

[Makum]

As you say , as soon ass an agreement is made with the South the North is in the Eu, as the part of a federal Goverment and in the Eu I would expect after a transition period, Turkey's funding will cease , Turkish troops will be on there way home due to the South being accepted as NATO member, and it won't be long before the TCs are screaming foul as there ain't no money in the pot to pay the Goverment pensions and workers. The Trokia come in make demands which will create havoc before loaning any money, the cost of living and unemployment increases, riots poverty and increase in crime will be on the cards.
Moral of the storey, hang on to your house, property prices should be at a high after an agreement, get rid and go somewhere nice before the rot sets in.

[elkiton]

Can't answer your question, but can post another somewhat related. When the two parts, communities, call them what you will North and South, assuming the vote on the referendum is favourable come together in some way under the common banner of "Cyprus", I would like to know
a) How the border will work as there are no customs borders under the Schengen Agreement.
b) How the "North Citizens" will be placed re being the EU.

'Cos I can see 1/2 the Island in and !/2 out in any sensible settlement proposal.

[PapaBravo]

Surely the whole point of a 'settlement' is to unite the 2 parts of the Island into the EU. As I read it, both North and South would have control over their own parts, but the whole of Cyprus would be a united entity within Europe. This will bring in lots of money from the EU for infrastructure such as roads, street lighting, etc, if the past events in Spain and the South are anything to go by. I do feel however, that we will have to accept the Euro and that is a mixed blessing. This is simply my own opinion and I have no qualifications upon which to base them apart from some common sense!

[mrsgee]

Uk has never accepted the Euro, although part of the EU....I for one would like nothing to do with the Euro.....

[tomsteel]

Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Lithuania, Poland, Romania, Sweden, and the United Kingdom are EU members but do not use the euro - source, Wikipedia.

[the butlers wife]

If the north went into the euro, everything in the shops would go up over night in line with prices in the south. Meat might be a bit cheaper
but everything else as far as I can see costs much more over the border. How will the locals cope with this as I can't see wages going up to compensate and if they do, how will businesses be able to afford the rises? We would struggle on our pensions to stay here, unless there were some benefits, like free health care and prescriptions. I expect there will be many expats like us who are probably already struggling, what with the fall in interest rates on their savings and the continual rise in food shopping, petrol, electricity etc. I wouldn't want to return to the UK as I love living here but if the north goes into the euro it might come to that, both for us and many others here in the north.

[Owl Lady]

If it comes to that, I'd rather starve to death here than freeze to death in the UK.I know you should never say never, but I could not contemplate the thought of going back to the UK.

[cyprusishome]

I cannot see any merging together of economies in the foreseeable future, there are too many disparities. There may be agreements put together on the way forward as part of any referendum but it will take a few years to achieve them. Assuming of course that a referendum accepts the proposals.

As for Turkey, the noises are that the military will not leave North Cyprus and the GC will never accept that. Also I can see no benefit to North being tied to Turkey joining the EU as that will not happen in our lifetime.

One thing I can say with 100% certainty is we foreigners will have no say in what happens!!

[Erkin]

To answer some of the question raised.
waddo - In the 2004 and now any unification will see the TL change to the Euro in the 2004 annan plan for 2 years both the TL and euro would run simultaneously, the same would have to apply again to give people, the banks and business time to switch over. In saying this, most business have already adopted the Euro in sense that everything in being imported is paid for in Euro and £.
As for Turkey keeping it's Military on the Island again the same plan will follow with slow withdraw of the army, If the Annan plan had been agreed on, today we would only have 650 Turkish Military, as for Turkey, Greece and UK retaining their Guarantee status that is the demand of the North and has no real effect on the talks or any future unification.

[Erkin]

PapaBravo,
yes the north control it's own internal affairs and the south like wise, so things like property, Roads, taxation ports and ports and other internal affairs will be run by the north and south separately. while the Federal government will be external issues only.
The euro will be adopted but the TL will run parallel for some time.
No official borders will exist but a line indication the north south divide will be in place. a bit like welcome to Scotland goodbye from Scotland.

[Erkin]

-the butlers wife
If and when the the north changes to the Euro it will actually be a lot cheaper not more expensive, for starters the double taxation on the items imported into the north will be reduced by 25%, what you fail to realize at present that 100% of the imports from Turkey or come via Mersin 10 which means we are currently paying VAT twice. What most people on this Island fail to realize that even though our so called motherland Turkey
trades and supports TRNC, it doesn't recognize TRNC on an official level. Even though we have an Turkis Ambassador, it is not officially here as no law has been ever passed in Turkey for formal recognition of TRNC an an Independent state.

[karmels]

Erkin.

Well said and well put.

[Erkin]

Thanks Karmels,

As a British Turkish Cypriot and a candidate in the next European Parliament elections in May, I answered the questions because I know that a lot of the EU Nationals are concerned, how these talks will effect them. But I can assure all EU Nationals living in the North, that hopefully this round of Talks produce something for the sake of all on Cyprus. For EU nationals there will be a lot to gain from the Federal Government as EU laws which are suspended in the north will be lifted, allowing EU national to freely live and work without having to pay for residency fees and work permits.

[guru]

Erkin, what do you think will happen with regard to territory and property issues?

[waddo]

Erkin, super information, many thanks! Although I was aware that most imports are paid for in Euros or US Dollars and then the final prices worked out into TL (including even more increases to take account of exchange rate conversion charges) and did anticipate that the North would take up the Euro in time, I can not see how prices would actually drop?

I must assume that the government, any government, exists on tax's? If there is a price drop on goods there must also be a similar drop in tax, other things must then go up to recoup the loss? It is too much for my knowledge but I am interested and hopefully intelligent enough to ask sensible questions. Have learnt more off this page today than anything published in the press, thanks.

[Erkin]

Waddo, As i Have explained the price will drop by around 20-25% because with direct trade and direct imports. At present any items purchased in Turkey or via Turkey is subject to VAT in Turkey, so we are paying double Vat. The current rate in North Cyprus 12-20% and like wise in Turkey, so when you remove the VAT from Turkey off the prices the prices will drop but in saying this how much the retailer will do is unknown.
If for example a Kg of Flour is now 4TL 40% of this is 1,60 VAT but after unification only .80TL will be VAT imposed by the north.so the double VAT and other taxation will be removed, As i said before even though our so called motherland supports us in one way but on the other hand they don't export to the items to us tax free like they are supposed to due to the customs union agreement of 1997 and 2005, so we end up paying double tax on everything. This is whole purpose why everything goes through Mersin 10, Turkey. Now you argue than alcohol is cheaper then a bottle of water because the tax imposed on alochol is based on 2% VAT where as on Flour it's 20% VAT. The other reductions will incure as Items shipped from one EU state to another is Tax by the supplier so for example 1kg flour in the UK is 0% VAT.

[Erkin]

Makum, You have painted a very dark picture in your statement.
Even if as you state the funding from Turkey will cease to exist, the EU will step in and provide funds to help both sides, one of the reasons why the Gc didn't get bailout funds like other EU states, is for 2 reasons. 1. Due to their stupidity of 2004 referendum with their No vote and 2 reason if Troika gave them the funds they wouldn't have put any reforms in place like the sale of state companies to the raise the fund needed.
and to add to your statement, Like the south most of the state owned companies will also be privatized so reducing the debt of the government to the minimal and not keep the 30,000 in employment. and more than likely for example Telecom will have to merge with the south anyway as the North does not have it own international code. In fact regarding this is technically in effect already as all the area codes are pre 74 so no upgrade will be needed. Bare in mind that both north and south will only have Internal powers as all other external areas will be dealt with by the Federal Government. Also countries like UK,USA and few other EU countries and the EU will step in a provide financial assistance. in 2004 the USA was going to granted $300,000,000 to help both sides and that being only one country.

[Marions]

Thanks Erkin. I think if nothing else this goesto show that you know what you are talking about as you stand for the EU elections. (Next week's KibKom Times will carry an article about Erkin and some lesser known facts about the elections). Thanks again. Keep it coming for those of us who are not as clued in as you are.

[Erkin]

http://cyprus-mail.com/2014/03/15/leven ... e-for-mep/

[the butlers wife]

Thank you Erkin for explaining this, it is a relief to me and I think many other expats to know that things may actually be cheaper if there
is a settlement.


The butlers wife

[waddo]

Erkin, Got it - I think. At this time we are paying double KDV but that isone lot to Turkey and one lot to KKTC?? If that is the case I now understand how the gov'nt will be able to survive - although it will have to shrink - to be able to provide the same/similar service it provides at present. I also understand that there would be a large "Jointing" of different tasks between the North and South which should reduce costs across the board for many things.

Please note that my original question was not about how cheap it would be to continue to live here, I am more interested in the country and its future survival than the cost of living - if it got so high that I could no longer afford to live here I would be in a sad state indeed as the UK cost of living (including rent/house purchase) forever precludes me from returning there, even if I so desired, which I do not.

Again many thanks, it looks like a slow transition to the Euro should the talks prove successful then and that would suit everyone.

[Erkin]

Waddo, Yep you got it, the Government will not loose anything as the KDV will continue to be added as normal onto the products but the import of good will be zero from Turkey as they will invoices the goods as export to the Federal United Cyprus. Hence the reduction in the price of the goods to only carry the KDV that will be imposed by the north.
and the 2nd point to add, that although most people are finding it expensive to shop in the south at the moment is only due to the loss of value on the TL against the Euro, but under a Federal Government the KDV will have to fall in line right across the Federal Cyprus hence reducing the prices even more as some products under EU law are less than 5%KDV. So in overall you are looking to save around 30-35% on KDV which means more money in your pocket.
If you take out the link just below Marions and give views please. Thanks

[Makum]

Thanks for your view Erkin, you tend to forget that the EU is at full stretch financially and I would imagine many demands would be made before they start to throw money at the bottomless pit that Cyprus economically is at present. Restructuring on a grand scale is necessary , the pension burden and attitude of unions to change will be a ball tied to the foot of Goverment trying to make progress, any money that comes from offshore gas will eaten away paying back the EU leaving little for investment that is needed to get the country standing on its own two feet. A dark picture I may have painted , but I believe it's a realistic picture, politicaians are known to all wear rose tinted specticals especially Cypriot politicians whoos favorite ditty is " I'm alright Jack pull up the ladder". A United Cyprus will no doubt eventually have it's benefits , but the road ahead will be no easy mountain to climb.

[annanirvanna]

I totally agree that I have learned more and had some niggling questions answered by Erkin's posts and I am very grateful for his in-depth data. I also wish to know how the dynamics and day to day cost would impact on expats living all year round in the North if things progress to reunification & EU entry. Still seriously looking at relocating if things don't change soon here in Sinai. Financial costs and daily living costs such as rent, utility costs, food costs plus all the other items that drain our purses I would like advice on as like most of you have a fixed monthly sum to work with. Also security on properties either rented or purchased if a expat lived in a property that may then become a disputed property. Thanks again Erkin and any advice will be warmly welcome by me

[Erkin]

Makum- Don't believe everything you here in the news or read in the press regarding the EU. The EU has over 500 Billion Euro reserves that be made available at any time. Just look at the sum given to Ukraine in the last 12 Billion in Aid package as a starter. The only reason the south did not get aid but troika instead is there own stupidity and punishment for their actions of 2004. If there was a referendum tomorrow on Cyprus and they re-kindled the affections again after for a Federal United Cyprus. Cyprus would receive something in the regions of 20-25 Billion Euro assistance. With a unification not only Cyprus benefits but Turkey as well with the production of Gas being pumped via Turkey. As I explained in previously Greeks Cypriots are there own worst enemy at times, and the bailout fund was a wake up call for the north and south.
Are you aware that between 2004-2010 the North has received over 300 Million Euro funding, but how many times have you read about it or heard it on the News. Also you must of heard in the recent reports in press that the North just recieved 500 Million low rate loan from Turkey to clean up the mess they have dug themselves into. So it seems that the cash is pouring in.

[Erkin]

annanirvanna-
As i have stated before, One of the reasons why the cost of living in the north is high is due to the double taxation (VAT-KDV) once the unification talks progress and a referendum held and both sides will vote 65-70% in favor of Federal United Cyprus. If in the event that south say NA yet again, it will be the death of the republic as both the UN security council have had enough of it, also the interesting part is that the USA has taken a keen interest in Cyprus, this has,t come out of the blue, the US interest was a political game that the south Played into getting the USA to think that they were going to give the Russians a base in Cyprus and it worked. The south took a big game with the Americans and it has paid off, without the Americans on board, Ankara would have continued to play the tough guy and not give much notice to the talks. As for the property issue well that is one of the major obstacles in the talks only for people living near the green line, other areas will not be touched as any land deals returns will be taken from the Green line northwards, but unlikely to effect Kyrenia or any of the coastal area with. As for property swaps, again, I think that it will be based on exchange of Turkish Cypriots properties in the South and Greek Cypriot Properties in the north and compensation to the Greek Cypriots to make up the rest. Also bare in mind that with the return of varosa and opening of the green line will see something in the region of 100,000 Gc being returned back to their own homes.

[Erkin]

As for cost of living, as I stated before prices will fall as double VAT will be removed. Some people said that they found the south to be more expensive at the moment that is not the case. The only resone why prices are higher for the people crossing over for shopping is due to the loss of value on the Turkish Lira. In fact over the last 6 months prices in the south have come down by around 10-12%.

[Makum]

Erkin, it is good to see EU funding benefiting the North providing much needed support for infrastructure and improving areas for tourism. Turkey throwing more money in the shape of a low cost loan is not rectifying the problem of the over subscribed Goverment payrole,it is only feeding it, before the next low cost loan, this is not sorting the problems which no doubt the EU will inherit and deliver a much needed hammer blow by demanding changes before any funding is given.
This as I said in my initial post will lead to problems when the comfort blanket is removed from a population that has been spoon fed since 74, totally over reliant on state employment and self preservation,the open market will be a killer blow.
May your campaign go well, I admire your commitment and energy the vision of a new way for Cyprus is encouraging unfortunately the baggage being dragged with it will be its downfall, good luck with you quest Sir.

[mrsgee]

maybe a wrong comparison....but a comparison it is......prices in Debenhams in the South are in some cases almost double the price of the same items in the UK.....no wonder the shops are empty......I really don't know how they keep going, Lidl, Alphamega and Carreforres excepted. I am not comparing TL with EU, but EU with sterling.....can't afford to shop in Debs that's for sure.

[Erkin]

Makum- Firstly thanks for your kind words, yes there is a lot of baggage that needs to be removed and it will be removed no worries about that. Yes the north has been spoon fed for the last 50 years by Turkey only because Turkey couldn't been seen turning it's back on the North after the action they took in 1974. They know from their mistakes that over the last 40 years the bottomless pit that the north turned into. as for the low cost loan, for the first time, the loan hasn't been handed over to the North Central bank but the to the Turkish Ambassador to ensure that the money pays for the real things and not the inflated things that parliament would spend it on, so over the coming months you will see a lot of people being laid off and paid off to leave their positions in Government post, The Government intends to reduce the overall staff to half within 12 months. Again all of these are part of the current talks between the north and south.

[annanirvanna]

Many thanks Erkin, I too wish you good luck in your forthcoming campaign. I will be keeping a very close eye on this thread for developments and information from other members. I hope all goes well for the folks in the North.

[Owl Lady]

Very interesting and informative postings and has answered a lot of niggling questions. Please, Erkin keep us up to date, and good luck for the future!

[waddo]

Erkin, Whilst not being a particular supporter of the EP and following the antics of the British MEP's who just seem to take the money, then sit back and do nothing, you could possibly understand why! However, the fundamental principal behind the EP is solid and I find it quite sad that so very, very few Turkish Cypriot politicians have a desire to run for the position of MEP! Perhaps it is the old story of being a big fish in a small pond that provides safety, but sticking your head above the parapet is something that requires a little more in the way of commitment to yourself and your country?

Good for you for having a crack at this. At last - maybe - the voice of the Turkish Cypriot can be heard outside of the boundary's of the country and in a place where the voice can be heard by many and not changed in context by the press or politicians of other Nations.

If Cyprus wish's to become one federated Island then all its peoples, regardless of race or culture should get behind it and push as one single entity. The situation here is not unique in that all Nations have internal squabbles (Ukraine being the latest but UK/Scotland is similar) that need to be solved before solidarity (now I sound like a union man) can be achieved. The sad part seems to be that if the current talks are successful and Island "jointary" is achieved, without any other Turkish Cypriot politician having applied to become an MEP, then surely the EP representation of Cyprus would be simply one sided???

I know that this is far from the topic I first raised but I am simply giving my views on the link as you requested. Please note that the above are only my thoughts and views and that I have no political background at all, just a common man's thoughts.

[Erkin]

Waddo- Very interesting views but one of the things that you have overlooked is that all political parties in the north actually want to put a candidate forward for the EP elections and I will explain why they are not prepared to do so at the present time.
1) EP Elections can not be held under the 1960 Agreement article 63 giving the right of 3-1 seats to Tc, in the case of the EP elections being 2 seats for TC. as EP elections is open to all EU Nationals and not ethnic based between GC & TC.
2) In fact if the political idiots which they are actually sat down and thought this threw correctly, then with the amount of Tc holding South Cyprus ID cards, minimum of 3 seats can be won by the north, giving them equal power in the EP.
3) The reason why the EU can not allow the North the hold the elections in the north even with EU Supervision, is that the north insist that all TRNC card holders are eligible to vote which means over 280,000 voters well when you look at that figure means that all 6 seats can be held by the North, but what the politicians fail to realize that not all TRNC card holders are EU national at present until after any unification.
4) The other point that the EU declined on was simply because of the violation of EU citizens rights in the North, meaning you for example as basic right of all EU Nationals are based on freedom to travel freedom to settle in any EU state and freedom to trade in any 28 EU states. So when you look at this. Are your rights as an EU citizen being protected in the north? NO, like all EU Nationals you spend 1000's in resident permits year in year out.
5) How many policians are now TC and how many Settlers joined the parties in the north, so how can you ensure that the nomination of a person by that party is an EU National.
and lastly 6) what about your rights as an EU to vote and even have the right to become a candidate in the elections, after all that is your basic EU Right, to be be treated the same as the national of that country you are residing in.
Sorry but I have no sympathy for any political party in the north and this clearly shows why.
Are you aware that they all doing everything in the power to stop people like me from speaking on behalf of the Cypriots and EU Nationals? not one TV or newspaper in the north has so far declined to carry any article in hte elections process despite giving them all the correct information.

[Erkin]

and one other point, for example the Ormans case. What happened to all the promises made to them by the Government in the north?
or the thousands of EU Nationals in the south who are being done out of their homes with fraudulent sales in property titles?
Not one Gc MEP would dare to raise the question the EP, so who is protecting their interests in Cyprus?
Unfortunately when you have MEPs that only interest in the EP is to put down Turkey every second they get and not work for the people but for their own and their parties politician gains.
to me no person should be allowed to stand from any party in the north or south but all candidates should be Independent in order to do their duties accordingly and protect the rights of the Citizens in the EP to improve their lives to better standards.

[waddo]

Erkin, Understond but......... We elected to come and live in the TRNC in 2001, we finally made it here forever in 2007 and in the intervening period some things had changed. However, when we made our final choice of the TRNC no part of Cyprus was in the EU so with our way of looking at things, point 4 of your explanation made no difference to us then or indeed now. Inside the front cover of my passport it states "Her Britannic Majesty's Secretary of State requests and requires in the Name of Her Majesty all those who it may concern to allow the bearer to pass freely without let or hindrance, and to afford the bearer such assistance and protection as may be necessary." Now that is a paragraph that harkens back to the days when the UK had gunboats and the will to protect its citizens - sadly this is long in the past! The EU appears to have the same outlook on life and simply writes a new rule/law when it is found wanting in an area where it now fails. After all, as EU citizens it was our choice to live in a non EU country with all the problems that would entail - we have no complaints there.

How about an "Independents Party" then? This would be a party that - by law - could never be elected to positions of power within the country but could only represent the country, as a whole, on behalf of the people of the country. Difficult to say the least but they would make the best MEP's.

Until such time as the North is a fully accepted member of the EU things will stay the same and that is sad but true.

[Erkin]

Waddo- fully agree