Friday 11 March 2022

North facing "humanitarian crisis"


Esra Aygin 

“Turkish Cypriots will, soon evolve and start being able to see in the dark, just like cats!”

This is what user Strahd Shonya wrote in their Twitter account to protest the unbearable daily electricity cuts in the northern part of Cyprus. 

Between 1 and 16 January when the list was last updated, there were a total of 139 electricity cuts mainly due to lack of investments, fuel shortages and the inability to buy some very expensive spare parts for failed turbines - all a result of one of the worse economic crises Turkish Cypriots are going through in their history. 

The Turkish Cypriot economy has been in free-fall in recent months as the Turkish lira plummeted because of the interest-rate cutting policies of Turkish President Recep Tayyip Erdogan. The lira, as of 20 December 2021, had fallen by 54.5 per cent against the euro since 31 December 2020 .

The fall in the value of the Turkish lira has led to soaring prices in in the northern part of Cyprus, where the economy is dependent on imports. The inflation here reached %46 in December - the highest in Europe. In the same month, the food and non-alcoholic price inflation was %58. Although the official currency is the Turkish lira in the northern part of Cyprus and people’s incomes are also in liras, many expenses like rents and school fees are in foreign currencies, which exacerbated the situation. 

As Turkish Cypriots experienced a huge drop in their purchasing power leading to a decline in their living standards, they also saw their debts cascade. Most borrowing in the north is done in foreign currencies since banks do not trust the lira. The depreciation of the Turkish lira against the British Pound, euro and the dollar put debtors, whose earnings are in Turkish liras and debts in foreign currencies, in a dire situation and left them unable to meet their financial obligations. The debt of the administration also soared as the funds from Turkey are recorded as payable in dollars. 

Another direct result of the foreign currency crisis has been petrol shortages as people rushed to stock up fuel, or the petrol stations stopped sales, or the main providers did not want to sell to the stations ahead of expected price increases due to the depreciation of the lira. 

The inflation and foreign currency crisis coupled with the long-standing interruption in the flow of funds from Turkey has forced the Turkish Cypriot administration to halt all public investment projects and borrow from banks to pay the salaries. 

“The borrowing limit of the administration is up,” said Turkish Cypriot politician Dogus Derya. “If the administration were a company, it would have to declare bankruptcy right now. We are getting poorer each passing day because of something we have no control over – because of the decisions made in Turkey. This is making the northern part of Cyprus unbearable. People are being tested with hunger.  We are at a very critical threshold.” 

Economist Mertkan Hamit agrees: “The situation is turning into a very serious humanitarian crisis. This can no longer be called an economic crisis.” 

The dire situation led many Turkish Cypriots to look to the southern part of Cyprus for job opportunities. In December, Turkish Cypriot union Turk-Sen, upon demand from its members, partnered with Greek Cypriot labour union Sek to allow up to 8,000 Turkish Cypriots to work across the divide mainly in tourism, construction, and restaurants. 

As people struggle to make ends meet, there also are increasing calls in the society to ditch the Turkish lira and unilaterally adopt Euro. 

Last Sunday’s general elections took place against the backdrop of this crisis and with the Higher Election Board asking the presiding officers of the ballot boxes to bring along battery-operated lamps or flashlights just in case there is a power cut. 

Unlike previous elections, the political parties did not talk about the Cyprus problem at all. The focus was the economy. 

“We can say that there were roughly three blocks in the elections, and they were all focused on the economy,” says Hamit. “But they all offered different solutions.” 

The first bloc was composed of those parties that see the solution in being able to get money from Turkey, according to Hamit. “They say they will have the best relations in Turkey, and they will be the best in convincing Turkey to send more money.” 

This block was mainly represented by the National Unity Party UBP, which got 40.4 per cent of the votes in the elections on Sunday and is expected to form the ruling coalition in the coming days. 

The second bloc advocates that Turkish Cypriots need to take responsibility and make reforms to improve the economy while also keeping amicable relations with Turkey, according to Hamit.  This bloc was mainly represented by the Republican Turkish Party CTP, which in its election manifesto had a number of economic measures including a “planned and gradual transition to a stable currency.” CTP got 32.8 % of the votes. 

The third bloc was the bloc that believes that there is neither the political will nor the budget to make reforms and any measure will anyway remain largely ineffective as long as the north’s dependence on Turkey continues. “This bloc advocates that if there is no solution to the Cyprus problem, we have no economic salvation. And this bloc manifested itself in the boycotters,” says Hamit.  

The abstention rate in the elections was %41,8 – the highest up to date. However, it is not possible to know how many of the absentees did this for political reasons. 

Hamit agrees that it is indeed very difficult for Turkish Cypriots to fix their economy under the current circumstances and does not think the economy and the Cyprus problem are mutually exclusive.

“We don’t have the ability to adopt any fiscal measures except makeshift, palliative and ineffective actions,” says Hamit. “We are cut off from the world. We use a currency we have no control over. We don’t have access to funding. We can’t borrow from international institutions. We don’t have foreign investment. We don’t have the appetite to make reforms. We only have access to funds from Turkey, which is using these funds to shape politics in the north. All these can only be solved with the solution of the Cyprus problem.” 

It is a huge contradiction to not prioritise the solution of the Cyprus problem amid such a huge economic predicament, according to Hamit, who believes that In terms of economy “These elections were a paradigm doomed to fail.”

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