Tuesday, March 19, 2013

On multicultural Cyprus

The latest stage of the ongoing Cypriot financial crisis, a haircut imposed on depositors in Cypriot banks, has been covered very extensively throughout the blogosphere and the wider news media. We can only be thankful, I suppose, that there hasn't been a general run on banks across southern Europe. (Pessimists would remind me, correctly, that there is still time.)

One thing that has come up in the coverage is the extensive international involvement in the Cypriot crisis: Cypriot banks loaned to Greece and exposed themselves heavily, British expatriates and Russian investors have complained about their losses, and so forth. It's a minor irony that Cyprus, a small island with a total population of a million people, has become so globalized. Its strategic location can be thanked for that--in 1878, as the Ottoman Empire trembled in the aftermath of the catastrophic war over Bulgaria I blogged about earlier this month, Britain took Cyprus on as a protectorate, counting on using its strategic location to help protect the Suez Canal. Evolving after the start of the First World War into a fully-fledged crown colony, old Ottoman traditions of quiet co-existence between two ethnic groups began to evolve into the seeds of ethnonational conflict.

The Ottomans tended to administer their multicultural empire with the help of their subject millets, or religious communities. The tolerance of the millet system permitted the Greek Cypriot community to survive, administered for Constantinople by the Archbishop of the Church of Cyprus, who became the community's head, or ethnarch.

[. . .]

In the light of intercommunal conflict since the mid-1950s, it is surprising that Cypriot Muslims and Christians generally lived harmoniously. Some Christian villages converted to Islam. In many places, Turks settled next to Greeks. The island evolved into a demographic mosaic of Greek and Turkish villages, as well as many mixed communities. The extent of this symbiosis could be seen in the two groups' participation in commercial and religious fairs, pilgrimages to each other's shrines, and the occurrence, albeit rare, of intermarriage despite Islamic and Greek laws to the contrary. There was also the extreme case of the linobambakoi (linen-cottons), villagers who practiced the rites of both religions and had a Christian as well as a Muslim name. In the minds of some, such religious syncretism indicates that religion was not a source of conflict in traditional Cypriot society.

The rise of Greek nationalism in the 1820s and 1830s affected Greek Cypriots, but for the rest of the century these sentiments were limited to the educated. The concept of enosis--unification with the Greek motherland, by then an independent country after freeing itself from Ottoman rule--became important to literate Greek Cypriots. A movement for the realization of enosis gradually formed, in which the Church of Cyprus had a dominant role.

What's more, after the conclusion of the Greco-Turkish War of 1919-1922 led to a near-complete separation of Greeks and Turks into their respective nation-states, Cyprus was the only remaining substantial territory where Greeks and Turks lived mixed. It may have been inevitable that after independence, conflict between the Greeks and the Turks would eventually escalate into full-fledged war, resulting in a 1974 Turkish military intervention that led to the creation of a Turkish North Cyprus separate from the internationally-recognized--and overwhelmingly Greek--Republic of Cyprus.

As noted in the Library of Congress study on the country, published in 1991, Cyprus--like many other island societies--saw substantial emigration in the post-Second World War period, directed towards the colonial metropole of the United Kingdom.

The periods of greatest emigration were 1955-59, the 1960s, and 1974-79, times of political instability and socioeconomic insecurity when future prospects appeared bleak and unpromising. Between 1955 and 1959, the period of anticolonial struggle, 29,000 Cypriots, 5 percent of the population, left the island. In the 1960s, there were periods of economic recession and intercommunal strife, and net emigration has been estimated at about 50,000, or 8.5 percent of the island's 1970 population. Most of these emigrants were young males from rural areas and usually unemployed. Some five percent were factory workers and only 5 percent were university graduates. Britain headed the list of destinations, taking more than 75 percent of the emigrants in 1953-73; another 8 to 10 percent went to Australia, and about 5 percent to North America.

During the early 1970s, economic development, social progress, and relative political stability contributed to a slackening of emigration. At the same time, there was immigration, so that the net immigration was 3,200 in 1970-73. This trend ended with the 1974 invasion. During the 1974-79 period, 51,500 persons left as emigrants, and another 15,000 became temporary workers abroad. The new wave of emigrants had Australia as the most common destination (35 percent), followed by North America, Greece, and Britain. Many professionals and technical workers emigrated, and for the first time more women than men left. By the early 1980s, the government had rebuilt the economy, and the 30 percent unemployment rate of 1974 was replaced by a labor shortage. As a result, only about 2,000 Cypriots emigrated during the years 1980-86, while 2,850 returned to the island.

Although emigration slowed to a trickle during the 1980s, so many Cypriots had left the island in preceding decades that in the late 1980s an estimated 300,000 Cypriots (a number equivalent to 60 percent of the population of the Republic of Cyprus) resided in seven foreign countries.

Now, however, Cyprus has become a major destination for immigration. The politically most critical immigration has been in North Cyprus, where migration from Turkey--permanent and otherwise--has occurred on a politically controversial scale. Some estimates suggest that half of the population of North Cyprus, numbering something on the order of a quarter-million people, is of first- or second-generation Turkish immigrant background. This alleged high proportion was one reason why Greek Cypriots rejected the 2004 Annan plan for reunification of the island: a North that was substantially or maybe even mostly populated by immigrants wasn't a legitimate negotiating partner. Turning to the Norwegian International Peace Research Institute (PIRO), however, Mete Hatay's 2007 report "Is the Turkish Cypriot Population Shrinking?" makes a compelling case that this proportion is a large overestimate, product of authentic measurement errors and judgements of bad faith all around. I don't feel qualified to make any judgement on these figures apart from observing that a neutral third-party could be very useful.

Less politically controversial has been the substantial immigration into the Republic of Cyprus, amounting to a quarter of the total population of the European Union member-state. Attracted by the island-state's pleasant climate and (until recently) dynamic economy, tens of thousands of people have immigrated to Cyprus, from distant Britain (stereotypically retirees and other expatriates), from Balkan countries like Bulgaria, Romania and Greece, and from Russia. I've been following Russian interest in Cyprus for a bit at my blog. Suffice it to say that Cyprus' status as an offshore financial centre for Russians, its pleasant environment, and sentimental bonds of Orthodox Christianity shared with Russia helped make Cyprus a destination on par with Montenegro in the Balkans and Latvia. (Apparently the European Union is now in the process of making sure that the financial system of Latvia, slated to accede to the Euro next year, is free from Cypriot excesses.) Early in February, a Guardian report claimed that the Chinese were starting to come to Cyprus.

It will soon be carnival time in the city of Pafos on the south-west coast of Cyprus – and this year theme is China.

"Everything will be Chinese," says Pafos mayor, Savvas Vergas, in his office in the pretty, whitewashed city hall, fronted by classical Greek pillars. "Meals … folklore … Everything will be on Chinese culture."

The carnival will be a way of celebrating a most unusual boom in a country which, like others in southern Europe, has been stricken by the eurozone crisis. Property prices in Cyprus have fallen by around 15% since 2007. Yet an official survey published last month found that between last August and October more than 600 properties were sold to Chinese buyers, 90% of which were in Pafos.

"The real growth came after August because that was when the government made clear the terms and conditions for third country nationals to get permanent residence," says Giorgios Leptos, a director of the Leptos property group and president of the Pafos chamber of commerce and industry.

The opportunity to secure permanent residence in an EU member state is a huge attraction for Chinese because it offers them visa-free travel throughout the union. Almost 4,500 miles away, Lisha Tang, a young client at a Beijing property firm, is relishing the prospect.

"A house in Cyprus means travelling freely in Europe, which is great for young people," she says.

[. . .]

To obtain permanent residence in Cyprus, investors from outside the EU have to spend at least €300,000 (£260,000) on a property. They must also prove that they have no criminal record and are in good financial standing and agree to deposit €30,000 for a minimum of three years in a local bank account. Their permit normally arrives in about 45 days.

Cyprus is not the only EU state to be exploring this way of reinvigorating a stagnant property market. Last year, Ireland and Portugal also offered residency to foreigners who bought property worth more than a certain amount. In November Spain's trade minister, Jaime Garcia-Legaz, said his country was intending to follow suit in an attempt to clear his country's vast backlog of unsold homes.

Some of Cyprus' super-rich immigrants will fall prey to the bank levy.

A band of super-rich foreign tycoons who took Cypriot citizenship in recent decades – lured by a favourable tax regime – are expected to be among the hardest hit by the island's surprise deposit tax as several are believed to have been required to deposit at least €17m of their fortunes on the island to qualify for citizenship.

Billionaires attracted to the island by the controversial citizenship scheme, designed to court super-rich figures, include Norwegian-born oil tanker tycoon John Fredriksen, Israeli internet gambling entrepreneur Teddy Sagi, and Alexander Abramov, the Russian steel magnate who chairs FTSE 100 group Evraz.

Cyprus's then interior minister, Neoclis Sylikiotis, explained the rules to local newspaper Cyprus Weekly in 2010: "Cypriot nationality is given in special cases, following approval from the council of ministers … on the basis of specific criteria, including the applicant being over 30, having no criminal record, owning a permanent home in Cyprus and travelling to the island."

Further criteria include depositing at least €17m with a local bank over five years, direct investments of €30m, or registering a large business on the island.

Between 2007 and 2010 some 30 foreign nationals, mostly Russians, were reportedly granted Cypriot citizenship. Most prominent among them was Abramov. "Mr Abramov is considered to be offering high level services to the Republic of Cyprus, taking into account his business activities," explained Sylikiotis. "Therefore, reasons of public interest justify his naturalisation as a special case."

Whether or not any of this immigration will survive in the aftermath of the bank levy is open to question. In the case of Russia, initial outrage seems ready to lead to disengagement for stabler economic climes. A resurgence of Cypriot emigration, perhaps from both halves of the island, can't necessarily be excluded. I wonder what contingency plans the United Kingdom might have.

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