CO:M.\AISSION OF THE EUROPEAN COI\t.\IDNITIES 
COM(93) 313 final 
Brussels, 30 June 1993 
COMMISSION OPINION ON THE APPLICATION 
BY THE REPUBLIC OF CYPRUS FOR MEMBERSHIP 
FOREWQRD -A-
COY.llSSION OPINION ON THE APPLICATION 
BY THE REPUBLIC OF CYPRUS FOR MEMBERSHIP 
1. On 3 July 1990, the government of the Republic of Cyprus submitted 
to the Counci I of the European Communities an application for membership of 
the European Coal and Steel Community CECSC), the European Economic 
Community (EEC) and the European Atomic Energy Community C-EAEC). 
2. At Its meeting on 17 September 1990, the Councl I noted the 
appl lcatlon and decided to set in motion the procedures laid down in Article 
98 of the ECSC Treaty, Artlcie 237 of the EEC Treaty and Article 205 of the 
Euratom Treaty, asking the Commission to draw up an opinion, as reQuired by 
these provisions. 
3. Applications have recently also been received from several EFTA 
countries and from Malta, and an application was previously submitted by 
Turkey. The Commission delivered its opinion on Turkey's application in 
December 1989, followed by opinions on the applications of Austria (August 
1991), Sweden (July 1992), Finland (November 1992) and Norway (March 1993). 
It Is transmitting its opinion on the appl lcation submitted by Malta 
simultaneously with this document. 
4. The European Counc i I cone luded Its discuss ion of the Quest ion of 
enlargement at its Lisbon meeting on 26 and 27 June 1992 with the fol lowing 
observations relating to the EFTA countries: 
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"The European Councl I considers that the EEA Agreement has paved the 
way for opening enlargement negotiations with a view to an early 
conclusion with EFTA countries seeking membership of the European Union 
... The official negotiations wi I I be opened immediately after the Treaty 
on European Union is ratified and agreement has been achieved on the 
Delors I I package." 
In the I lght of the decisions taken by the European Counci I at its Edinburgh 
meeting on 11 and 12 December 1992, enlargement negotiations got under way 
in February 1993 with Austria, Finland and Sweden, and in April 1993 with 
Norway. 
As regards applications from other countries, the Lisbon conclusions 
continue as fol lows: 
" The European Counci I considers that if the cha I lenges of a 
European Union composed of a larger number of Member States are to be met 
successfully, para I lei progress is needed as regards the internal 
development of the Union and in preparation for membership of other 
countries. 
In this context the European Councl I discussed the applications 
wh i eh have been submitted by Turkey, Cyprus and Ma I ta. The European 
Council agrees that each of these applications must be considered on its 
merits. 
Relations with Cyprus and Malta will be developed and strengthened 
by building on the Association Agreements and their application for 
membership and by developing the pol ltical dialogue." 
5. The European Counc I I wh I eh met In Copenhagen on 21-22 June 1993 
"considered that its guidelines with regard to enlargement with the EFTA 
countries shall be without prejudice to the situation of other countries 
which have appl led to Join the Union. The Union wl I I consider each of these 
membership applications on its own merits. 
The European Council welcomed the Commission's intention to present 
shortly its opinion on Malta and on Cyprus. These opinions wi I I be examined 
rapidly by the Counci I taking into consideration the particular situation of 
each of the two countries". 
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INTRODUCTION 
6. Since the Island was declared Independent In 1960, the "Cyprus question" 
has constantly been before the United Nations and has never left the agenda 
of the Security Councl I. 
The existence of the Greek and Turkish communities side by side, but 
differing in language, culture, religion and national traditions, conferred 
on the young republic a turbulent history, I ittered with crises and 
outbreaks of intercommunal violence, culminating In 1974 in a coup inspired 
by the supporters of Integration with Greece. This resulted in a military 
intervention by Turkey. The outcome of the crisis of August 1974 and the 
occupation of part of the territory of Cyprus by the Turkish army was the de 
facto partition of the Island, which led to large-scale population movements 
across the cease-fire I lne and, more especially, from the northern to the 
southern part of the Island. 
This de facto separation of the two communities, Turkish in the north and 
Greek in the south, remains to this day. With very rare exceptions neither 
people nor goods nor services can cross the dividing I ine. In 1983 the 
northern part of the Island declared itself an independent republic. With 
the solitary exception of Turkey, no member of the international community 
has recognized this republic. Until recent years the diplomatic efforts 
conducted under United Nations auspices to bring about a mutually acceptable 
institutional solution had been blocked by the Intransigence of both sides. 
7. In 1992 it seemed at first that the intercommunal negotiations arranged 
through the good off ices of the United Nations Secretary-General might 
provide the means of gradually hammering out a solution based on a 
two-community and two-zone federation. The principles of this solution were 
approved unan I mous I y by the Se cur i t y Counc I I in Apr I I 1992 
(resolution 774/92). The lntercommunal discussions that took place In 
October and November 1992 revea I ed, however , that a great many po I nt s of 
disagreement remained, including on general principles and institutional 
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aspects of the future federation. The discussions were resumed in the 
spring of 1993 and although it is hoped that they may lead to a final 
agreement, the poss i bi I i ty of continuing disagreements can st i II not be 
ruled out. 
a. When presenting its application for accession, the government of the 
Repub Ii c of Cyprus, recognized by the European Community and its Member 
States as the only legitimate government- representing the Cypriot people, 
addressed the Community on behalf of the whole of the island. The 
application was strongly challenged by the de facto authorities of the 
northern part of the island. Whl le acknowledging that it would be in the 
interests of the Turkish Cypr lot community to form part of the European 
Community, these authorities rejected the right of the government of the 
Repub Li c of Cyprus to speak for the who I e of Cyprus in such an approach. 
They based their position on the Guarantee Treaty and the wording of the 
1960 Constitution, which grants the president and vice-president (a Turkish 
Cypriot) a veto over any foreign policy decision, particularly any decision 
on Joining an international organization or alliance that does not count 
both Greece and Turkey among its members. They consider, accordingly, that 
in the prevai I Ing circumstances the Community should not take any action on 
the app I i eat ion. 
The Community, however, fo I low Ing the logic of Its estab Ii shed posit ion, 
which is consistent with that of the United Nations where the legitimacy of 
the government of the Republic of Cyprus and non-recognition of the "Turkish 
Republic of Northern Cyprus" are concerned, felt that the application was 
admissible and initiated the procedures laid down by the Treaties in order 
to examine it. 
9. The Community has therefore to establish its position on whether Cyprus 
is eligible for membership, its capacity to adopt within a reasonable time­
scale the acguis communautaire, in particular the rules concerning the 
single market and the common policies, in order to become a dynamic member 
of the economic and monetary Union and participate actively in the common 
foreign and security policy. 
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This opinion deals with all these factors and for the most part confirms -
at least with regard to the southern part of the island -the Commission's 
assessment in its communication of 24 June 1992,1 namely that "adoption of 
the acgu!s communautaire would not appear to present insurmountable problems 
in the case of Cyprus". This assessment covers both how democracy is 
organised and how it operates in Cyprus -confirmed as satisfactory in the 
last presidential elections -and also the structure of its economy and its 
regulatory framework. 
10. As a result of the de facto division of the island into two strictly 
separated parts, however, the fundamental freedoms laid down by the Treaty, 
and in particular freedom of movement of goods, people, services and 
cap I ta I , right of estab I I shment and the uni versa I I y recognized po I it i ea I , 
economic, social and cultural rights could not today be exercised over the 
entirety of the island's territory. These freedoms and rights would have to 
be guaranteed as part of a comprehensive settlement restoring constitutional 
arrangements covering the whole of the Republic of Cyprus. 
11. In examining the eligibi I ity of Cyprus for membership and its capacity 
to be a fully participating member of the Community and the European Union, 
the Community must therefore also have the greatest regard to the special 
links binding one of the Cypriot communities to one of the Member States, 
and the links between the other Cypriot community and a country which is 
associated with the Community -and also an applicant for accession -and 
one which is of major strategic, pol iti.cal and economic importance to the 
Community. 
12. In drawing up this opinion, the Commission relied on information on the 
situation in Cyprus provided by missions visiting the island or by the 
authorities of the Republic of Cyprus, with which it has maintained close 
contact, notab I y through the Miss ion of the Repub Ii c of Cyprus to the 
Communities. 
Europe and the challenge of enlargement. 
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In keeping with their challenge to the application for accession lodged by 
the government of Cyprus, the Turkish Cypriot authorities declined to 
cooperate with the Commission In the technical preparation of this opinion. 
Data on the northern part of the Island were therefore obtained from the 
government of the Republ le of Cyprus or from aval lable International 
sources. They m I ght therefore have to be supp I emented at a I ater stage. 
The Commission Is of the view, however, that the range of Information In Its 
possession Is such as to enable It to back up the analyses and conclusions 
of this opinion. 
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PART ONE 
I. Outline of the de facto situation in Cyprus 
I I. Prospects for a settlement of the Cyprus question and Integration with 
the Commun I ty 
Ill. Current state of relations between Cyprus and the European Community 
IV. Economic aspects of Cyprus's transition towards integration with the 
Community 
V. Cyprus's participation In Community institutions 
VI. Cone lus ions 
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I. Qutllne of the de facto situation In Cyprus 
13. Cyprus is an island strategically located in the north-east 
Mediterranean with a population of approximately 700 OOO occupying an area 
of 9 251 km2, i.e. a relatively low density (76 inh./km 2) and, at about 1% 
per year, low popu I at Ion growth. There is a high degree of urban I zat ion, 
with rates of literacy and school enrolment and even secondary and higher 
educat Ion, in the southern part of the Island at least, are comparable to 
levels In the most advanced countries. 
A popu I at ion of some 570 OOO Ii ves in the south of the is I and, wh I eh Is 
controlled by the government of the Republic of Cyprus. In addition to the 
130 OOO Turkish Cypriots I iving in the north, there is also a Turkish 
military force (some 30 OOO strong according to United Nations' estimates) 
and a large number of Turkish settlers (between 45 OOO and 50 OOO according 
to the same source) who have moved in since the 1974 military intervention. 
It should be mentioned that part of the Turkish Cypriot population that was 
present on the Island In 1974 has since emigrated, notably to Western 
Europe. The northern part of the Island as currently divided represents 37% 
of the total area. 
14. The Island's economic development since its de facto division has 
fol lowed very different courses. The south has experienced remarkable 
economic growth, based largely on service Industries and especially tourism, 
giving a GDP per inhabitant of about ECU 9 OOO on average for 1991, i.e. 
higher than In several Community Member States. Development in the north, 
which ls more agriculture oriented, has not been so fast. As a result of the 
north's diplomatic Isolation, its potential and Infrastructure for tourism 
have not been fully exploited. The contribution of agriculture to 
employment, added value and foreign trade continues to be very signlf lcant 
In this part of the Island. The GDP per Inhabitant is three or four times 
smaller than in the south. 
15. Politics in Cyprus has also fol lowed different courses since 1974. The 
Republic of Cyprus, whose authority extends in practice only to the south of 
the island, has retained the constitution of 1960 although, of course, all 
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provisions relating to the participation of the Turkish community in the 
exercise of executive, legislative and judicial powers are no longer 
applied. Indeed, some have not been applied since the inter-communal crisis 
of 1963. 
Cyprus has a presidential-type constitution and a par I lament with a single 
chamber. The current President, Mr Clerides, was elected for five years in 
February 1993 with the support of two parties forming a majority in the 
chamber. 
There Is a wide consensus in par I I ament beh Ind Cyprus's app l I eat I on for 
Community membership and the long-standing, liberal-influenced economic 
policy which has been fol lowed for several years and has been maintained by 
the government of Mr Cler ides. 
16. The government in the north, which is not recognized by the 
international community, adopted a constitution by referendum in 1975. The 
constitution was later modified In 1985. 
Mr Denktash was elected President under this constitution and 
re-elected In 1985 and 1990. He holds a large majority in parliament owing 
mainly to the Turkish settler vote. Mounting opposition is being voiced by 
some sections of public opinion to the Mr Denktash's stance both on 
economic issues and on the settlement of the Cyprus question. 
17. On the subject of respect for democracy and human rights, two points 
must be taken Into account, namely that the Island's forced partition alone 
represents a serious Infringement of the fundamental freedoms of citizens of 
Cyprus and that the rights of victims of the events of 1974 have not yet 
been restored owing to the lack of apolitical settlement. The presence of a 
considerable number of Turkish settlers and the demographic changes that 
result from this are also considered as an infringement of the political and 
economic rights of the people, including by some sectors of Turkish Cypriot 
pub I I c op In ion . 
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Apart from the direct and indirect consequences of the partition of 
the Island, human rights situation is as fol lows. The constitution of Cyprus 
protects the rights of people belonging to the three national minorities and 
establishes freedom of speech and the right to free assembly , equality of 
al I before the law and bans al I forms of discrimination. The Independence of 
the Judiciary Is guaranteed. Al I these provisions are effectively respected. 
However, In the North of the Island, opposition parties have mentioned 
certain constraints and restrictions In their activities, in particular as 
regards access to the media. 
18. Another aspect of the pol ltlcal tension in Cyprus comes in the shape of 
the extensive mi I itary presence and excessive presence of weapons. 
In addition to the estimated force of some 30 OOO Turkish troops, 
there is a permanently mobilized Turkish Cypriot force-In the north of 
Cyprus of an estimated 4 OOO. A further 26 OOO form the reserve force. In 
the south, Greece maintains a force of Just under a thousand alongside the 
Greek Cypriot national guard consisting of 10 400 men plus reserve force of 
100 OOO. 
Weapons on the Island are becoming increasingly sophist lcated, to. 
the point where the defence effort maintained by each party is eating deeper 
into national budgets. 
The United Nations .force UNFICYP (1 513 strong in March 1993), which 
was dispatched in the wake of the civi I war in 1964, sti 11 occupies the 
ceasefire I ine. After much hard debating, the United Nations recently 
adopted a dee is Ion wh I eh changes the way this force is financed and Its 
structure and is to reconsider Its mandate in December 1993. 
Mention should also be made, finally, of the two military bases in 
southern Cyprus maintained by the United Kingdom under British sovereignty. 
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11. Prosoects for a settlement of the Cyorus question and Integration with 
the CQllftlnlty 
19. The need for close cooperation between the two communities to 
achieve the integration of Cyprus with the European Community Is highlighted 
In the "set of Ideas on a comprehensive framework agreement on Cyprus". This 
document, unanimously endorsed by the Security Council under resolution 
774/92, formed the basis for Inter-communal negotiations carried out by the 
Secretary-General of the United Nations during 1992. It proposes a 
settlement based on a Cypriot state with a single sovereignty, International 
personality and citizenship, with guaranteed territorial independence and 
Integrity and Including two pol ltlcal ly equal communities In a bl-zonal, bi-
communal federation. 
However, as it stands, the text was not accepted by the 
representatives of the two communities. Amongst Issues which stl II remain to 
be settled, as can be seen clearly from the report presented by the United 
Nations Secretary-General at the conclusion of the talks In October-November 
1992, Is the fact that the Turkish Cypriot side wants a solution to the 
constitution question which Is more "confederal" than the solution 
suggested by the "set of Ideas". President Clerldes, on the other hand, 
while accepting the "set of Ideas", has expressed the will, since his 
election, to Introduce amendments, notably so as to reinforce references to 
human rights, make Improvements on the operational side of the executive 
branch and make It more compatible with future membership of the Community. 
As a result, the final balance of the settlement, especially on the 
institutional Issues, Is still the subject of talks between the parties 
concerned. 
20. As a measure of support for the efforts of the Secretary-Genera I, 
the Security Council has called on all parties to continue striving for a 
pol ltlcal settlement. More recently, the emphasis seems to have shifted 
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towards Implementation of practical measures aimed at building confidence 
between the two communities. Agreement on these measures could make clear 
the wl I I lngness of both parties to advance to an overal I settlement. 
21. It Is of the utmost Importance that the process started by the 
United Nations Secretary-General leads to an equitable solution which deals 
fairly with the Interests of each community. It is equally Important that, 
whatever the institutional balance decided In the final settlement, the 
process results in the establishment of Institutions which ar·e capable of 
carrying out their responslbi I I ties both effectively and efficiently. 
In this context care should therefore be taken with a view of the 
posslbi I ity of Community membership to ensure that the decision-making 
process of the executive and legislature is compatible with the Community's 
discussion and decision-making apparatus and wi I I enable the Cypriot 
authorities to adopt the acguls communautaire and Implement It effectively 
throughout the Island. 
22. In relation to the Common Foreign and Security Policy, the need to 
promote a political settlement is all the more paramount as the current 
situation would make It difficult for Cyprus to accept and Implement 
commitments made under the European Union Treaty. The political problems 
linked to the status guo would Inevitably have an Impact on the Community's 
policies, especially those concerning Turkey. Cyprus must also give up Its 
membership of the Non Aligned Movement of which it was a founder-member and 
In which It continues to participate actively. 
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Ill. Relations between Cyorus and the Eurooean community 
The Association Agreement 
23. Cyprus has been I Inked to the European Community s i nee 1973 by an 
Assoc i at Ion Agreement wh i eh provides for the estab Ii shment of a customs 
union In two stages. This Agreement excludes discrimination between Cypriot 
or Community nationals and contains arrangements on trade and on f lnanclal 
and technical cooperation which are to be applied for the benefit of the 
entire population of the Island. 
The f I rst stage provided for the phased reduction of tar I ffs on 
Industrial goodJ and agricQltural products. This stage was due to expire In 
June 1977 but was extended to the end of 1987, the dead I lne by which all the 
alms we~e achieved. 
The Protocol governing the transition to the second stage of the 
Agreement, I.e. the completion of the customs union, I ikewlse In two phases, 
entered Into force on 1 January 1988. 
The f lrst chase, from 1988 to 1997, provides for: 
the reduction by Cyprus of customs duties and quantitative restrictions 
on Industrial products (except for petroleum products and 15 categories 
of sensitive products) and on the 43 agricultural products covered by 
the Agreement; 
the adoption of the Common Customs Tariff by Cyprus; 
the harmonization of accompanying policies: competition, state aids, 
approximation of laws. 
The second phase, from 1997 to 2002, provides for the free and 
unrestricted movement of industrial and agricultural products and the 
adoption of the accompanying policies required for completion of the 
customs union, including, in principle, the abolition of the origin 
rules appl lcable to manufactured products. 
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Current trade arrangements 
24. The customs union agreement covers 82% of all trade between Cyprus 
and the Community. The current situation is as fol lows: 
the Community has entirely eliminated the final remaining restrictions 
on imports into the Community of industrial products originating In 
Cyprus, including text I le products, ~lothing and processed agricultural 
products not falling under Annex I I to the EEC Treaty; 
by 1 January 1993, the Republ le of Cyprus had already reduced duties by 
64.25% by comparison with the rates applied to the Community in 1973. 
However, the dismantling of tariffs in the north of the island has not 
kept pace with the timetable fixed in the Association Agreement and 
Community exports attract duty at rates wh i eh are usua 11 y far higher 
than those appl led in the south. 
Adaotlng to the acguls communautaire 
25. A large number of the instruments required for the progressive 
adaptation of the Cypriot economy to the mechanisms of the single market 
established by the Community and to the lmpl !cations of the common 
commercial pol Icy are already contained therefore In the Association 
Agreement and the 1988 Protocol. 
The Commission considers that continuing with the proper 
implementation of the abovementioned instruments in accordance with the 
agreed timetable is the best means of ensuring a smooth passage for the 
Cypriot economy towards possible accession. 
26. On the subject of the adoption of the acguis communautaire, 
Article 27 of the 1988 Protocol guarantees that certain principles laid down 
in the EEC Treaty are applicable in relations between the two parties to the 
Association, e.g. competition rules, provisions on tax and approximation of 
laws. It is also stipulated that the measures relating to the application of 
these principles which are essential to ensure the smooth functioning 
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of the customs union shall be agreed by common accord by the beginning of 
the second phase at the latest, which should normally mean by 1998. If this 
deadline is to be met, the Cypriot government and the Commission must work 
in close collaboration to ensure that the two parties can honour the 
commitments made and that Cyprus can adapt Its legislation in ful I knowledge 
of the facts. 
Financial and technical cooperation 
27. Fi nanc i a I a Id from the Commun I ty to Cyprus began with the First 
Financial Protocol on 1 January 1979. From that date, up to and including 
the Third Financial Protocol, which is currently in force, the Community has 
granted Cyprus a total of ECU 136 mi II ion in the form of EIB loans (ECU 92 
mi 11 ion), grants (ECU 29 m I I I ion) and spec I a I loans or risk capita I 
CECU 15 mill ion). The projects financed mainly concern Infrastructure (urban 
development, drainage, electricity) and have benefited the entire population 
of the island. These projects have mostly been concentrated in the area of 
Nicosia. 
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IV. Economic asoects of cvorus•s trans It Ion towards lntegrat Ion wl th the 
community 
28. Study of the economic situation of Cyprus confirms the view that not 
only would its accession to the Community create no insurmountable 
difficulties but, on the contrary, as long as it was carefully planned and 
backed up by the appropriate policies, would bring about greater prosperity 
and, In particular, would help the north make up the economic ground on the 
south. 
29. In the introduction to this opinion, reference was made to the 
island's political division and how this went hand in hand with different 
levels of economic development. 
Th Is different I at I on Is ref I ected eQua I I y In structures of 
production, In the extent of openness to the outside world and of 
international specialization, In monetary policy and, in the long run, In 
economic performance In terms of income, ful I employment, lnf lat ion and 
foreign trade. 
30. The southern part of the island is more geared towards Industry and 
services -mainly International tourism -though its comparative advantages 
in agriculture are also worth mentioning. Industry accounts for three­
quarters of exports of goods. The large trade deficit is more or less 
compensated by the earnings from tourism. More than half of all trade is 
with the Community. 
31. Economic growth Is strong, averaging 6% over the last decade and, on 
account of a lack of manpower, the Republic of Cyprus resorts to labour from 
Eastern Europe and, lately, has even agreed to al low workers from the north 
to cross the border for the day. Despite overheating of the economy and full 
employment, inflation has been pegged to a level of 6%. These good 
performances have been greatly aided by adherence to a long-term policy of 
stabilization of the Cypriot pound against the currencies of its trading 
partners and, more recently, the ECU. 
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32. Despite this record, accession to the Community wi I I require 
determined efforts from the state and the business sector.The economy 
continues to be overdependent on tourism, which implies a risk, in the long 
term, of an excessive drain on limited natural resources (e.g. water) and 
Infrastructure and represents a factor of considerable uncertainty for the 
economy In apolitically sensitive region, as the Gulf crisis demonstrated. 
It Is vital, therefore, to diversify services and to consolidate 
industrial development, especially as analysis of industrial structures 
reveals a considerable degree of vulnerabi I ity to the required level of 
exposure to international competition. Despite the steps taken so far 
towards approximation to the Common Customs Tariff, most sectors of industry 
still hide behind high tariffs. Duty in excess of 50% is not uncommon, even 
in trade with the Community, where there is also local production. Many 
sectors suffer from a lack of innovation and the quality of their products 
Is vastly Inferior to equivalent Community goods. Unti I now, foreign 
Investment, one source of technological advance, has received little 
encouragement and Is subjected to severe restrictions. Maintaining the 
competitiveness of industry is thus still too closely linked to external 
protect Ion and espec i a 11 y to aid in a var I ety of forms: guarantees, tax 
exemptions, investment or export f lnance subsidies from the state. 
33. Progress towards Community membership would Involve completing the 
dismantling of tariff protection, reducing aid and giving foreign investors 
greater freedom. The restructuring that such a policy requires, and which is 
already one of the economic goals of the present government, will be made 
easier by the situation of ful I employment in Cyprus. 
34. Changes would also be necessary in the banking and financial system. 
Although payments relating to current transactions with the outside world 
are relatively unrestricted, capital movements are strictly 
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regulated. Liberal lzlng capital movements wi I I require a fundamental reform 
of the f i nanc i a I and monetary system and of procedures for credit and 
currency regulation. 
With the exception of Interest rates, which are f lxed by law at 9%, 
this regulat Ion of the markets is carried out solely on a Quantitative 
basis. The introduction of market mechanisms in the system, i.e. use of the 
interest rate and greater compet It ion In the banking sector, wou Id he Ip 
improve economic performance by reducing the activities of speculators -
e.g. investment In the property market -and at the same Increasing the 
range of Instruments for macroeconomic regulation available to the 
authorities, which at the moment consist only of exchange rate management 
and budgetary policy. 
35. The Isolation of the northern part of the island has weighed heavily 
on its development policies and economic performance. The economy in the 
north is closely linked to the economy of Turkey, from where it receives a 
substantial amount of budgetary support and which provides 40% of Its 
Imports, as wel I as being the second export market after the Community. The 
absence of International air links, except to Turkey, has not allowed the 
north to take full advantage of international tourism, despite possessing 
the initial potential in the way of infrastructure. Tourist arrivals, 
including three-quarters of Turkish nationality, generate only a quarter of 
the earnings from tourism in the south. Agriculture, In which the north has 
considerable potential, provides a quarter of employment and 10% of added 
value. Industry provides about 10% of employment and contributes some 11.5% 
of GDP. Public service workers form a high percentage of total employment 
and state-owned enterprises play a significant role In economic activity. 
36. The Turkish lira Is the currency used in transactions. There was a 
proposal to Introduce the north's own currency, but It never came to 
fruition. The Cypriot pound is in paral lei circulation. Inflation is high at 
about 60% in 1991; the public sector finance deficit is substantial and is 
only partially covered by the budgetary aid from Ankara. Borrowing Is thus 
standard practice. To improve this situation would require a considerable 
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effort and would present the future federal government and the heads of the 
future Turkish Cypriot federal state with the delicate task of deciding on 
the al location of tax resources. 
37. Thus, in the northern part of Cyprus, the main economic issue, 
whether In relation to the settlement of the Cyprus Question or with a view 
to Community membership, Is how to make up the ground lost to the south. 
The potent i a I in terms of agr i cu I tura I and tourist resources and 
manpower exists, as does the basic infrastructure required to launch the 
economy, but a large productivity gap has opened with the south as a result 
of the north's isolation and under-capital lzation, which Is in turn linked 
to uncertainty about the political future of this part of Cyprus. 
If Cyprus were to Join the Community, resources could be allocated 
to the Improvement of infrastructure. A political settlement would also 
re-establ lsh the complementarities between the two parts of the island. 
Likewise, the restoration of international I inks and the full opening-up of 
Community markets would boost local and foreign investment. Taking into 
account the orders of magnitude involved for a region of 130 OOO 
inhabitants, there is no shadow of a doubt that the north could make up the 
ground on the south or at the very least enjoy a substantial improvement of 
its economic performance and income as a result of a successful accession to 
the Community and a satisfactory po lit i ea l sett I ement. In this respect, in 
addition to the transitional problem of the reduction of the public sector 
financial imbalances referred to above, mention should a1s·o be made of the 
dlff iculty of choosing a common currency and of the need, at the least in a 
first phase, to maintain wage differentials between the two parts of the 
island. 
38. The adopt Ion of the acgu is communauta ire In re I at Ion to 
macroeconomic, industrial and trade policy wi I I therefore present the 
southern and the northern parts of Cyprus with several problems, although 
none of these appears to be insurmountable in the context of an overal I 
settlement of the Cyprus Question. 
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In the south, as was shown in sect ion 111 of this opinion, the 
Instruments to carry out the transition and the political will to use them 
are a I ready ava i I ab I e. The Community, wh i eh has a I ready g I ven techn I ea I 
assistance for the Introduction of VAT and for other measures related to the 
transposition of the acguis communautaire, is prepared, If the government so 
wishes, to step up its technical cooperation. 
In the north, the prospect of a settlement is an Indispensable 
requirement to break the Isolation to which this part of the Island has been 
subjected and which prevents al I contact and all preparation for accession. 
However, It Is evident that considerably more effort wl 11 be required to 
adjust to the acguls communautaire than in the south. Nevertheless, the 
Commission Is convinced that, when the time is ripe and with close 
cooperation from the authorities of the Turkish Cypriot community, this 
effort can succeed as part of the necessary economic transition of this part 
of Cyprus. 
V. Partlcloatlon In eommunlty Institutions 
39. In sect ion 11 of this opinion, the Commission raised the issue of 
Cyprus's active participation in the Community's Institutions in the context 
of the prospects for a pol ltical settlement of the Cyprus question. 
Aside from this key Issue, the Commission observed in its report 
"Europe and the challenge of enlargement" that the Question of participation 
by Malta and Cyprus in the Community institutions would have to be resolved 
in an appropriate manner in the accession negotiations. The Commission 
envisaged addressing 'this Question in its opinions on these countries' 
app I i eat ions ' . 
In the same report the Commission expressed some initial thoughts 
(in points 23 to 26) on the various institutional Questions which will have 
to be addressed and resolved if the institutions of an enlarged Union are to 
operate smoothly and efficiently. 
-21 -
40. In the case of Cyprus, one Quest ion is the introduction of an 
additional language, Turkish, which is one of the two official languages of 
the Republ le of Cyprus. 
41. There wou Id a I so appear to be the pract i ea I di ff i cu It i es i nvo I ved 
for a state of Cyprus's characteristics in coping with the ful I range of 
responslbllltles and obligations entailed in the day-to-day running of the 
Community's institutions. 
The Republic of Cyprus has senior public officials with experience. 
As there Is not sufficient information available and In view of the north's 
long I so I at Ion, the Commission is unable to draw a similar conclusion in 
respect of that part of the island. In short, the Turkish-Cypriot community 
may have difficulty In finding appropriately Qualified persons amongst Its 
own peop I e and, as a resu It, prob I ems concerning the respect I ve 
representation of the two communities in Community bodies could wel I occur. 
42. Another Question that has to be asked in the light of the above is 
whether Cyprus would, in the foreseeable future, be able to take on the wide 
range of responsibilities and obligations entailed by the Presidency of the 
Councl I. 
43. The Institutional problems that would be posed by the possible 
accession of Cyprus or any other applicant of siml lar size should be 
examined as part of a more general assessment of the Institutions of an 
enlarged European Union that has a vocation for even further enlargement. 
The Intergovernmental conference scheduled for 1996 should address 
these Issues with a view to streamlining the operational structures of an 
enlarged Community and improving the efficiency of its decision-making 
procedures, while at the same time ensur Ing that each new Member state -
regardless of its size -including possibly Cyprus, is able to take part in 
an appropriate manner in the discussion and adoption of decisions and to 
assume Its responsibll I ties as a member. 
-22 -
VI • CONCLUS I ONS 
44. Cyprus's geographical position, the deep-lying bonds which, for two 
thousand years, have located the Island at the very fount of European 
culture and civilization, the intensity of the European Influence apparent 
in the values shared by the people of Cyprus and in the conduct of the 
cultural, political, economic and social I lfe of its citizens, the wealth of 
its contacts of every kind with the Community, all these confer on Cyprus, 
beyond al I doubt, its European identity and character and confirm Its 
vocation to belong to the Community. 
45. A pol It lcal settlement of the Cyprus Quest Ion would serve only to 
reinforce this vocation and strengthen the ties which I ink Cyprus to Europe. 
At the same time, a settlement would open the way to the ful I restoration of 
human r lghts and fundamental freedoms throughout the Island and encourage 
the development of pluralist democracy. 
46. The Commission is convinced that the result of Cyprus's accession to 
the Community would be increased security and prosperity and that It would 
help bring the two communities on the island closer together. If there were 
to be a political settlement, the prospect of the progressive re­
establ lshment of fundamental I lberties would help overcome the Inevitable 
practical difficulties which would arise during the transition period In 
regard to the adoption of the relevant Community legislation. In regard to 
economic aspects, this opinion has shown that, In view of the progress 
towards a customs union achieved thus far, the adoption of the acguls 
communautaire by Cyprus wi I I pose no insurmountable problems. The Commission 
Is not underestimating the problems that the economic transition poses. 
However, the economy of the southern part of the Island has demonstrated an 
ab 111 ty to adapt and seems ready to face the cha 11 enge of I ntegrat Ion 
provided that the work already started on reforms and on opening up to the 
outside world is maintained, notably in the context of the customs union. 
This opinion also has also shown that there wi 11 be a greater chance of 
narrowing the development gap between north and south in event of Cyprus's 
integration with the Community. 
The government of the Repub Ii c of Cyprus shares this conv i et ion. 
Even though they object to the conditions under which the application for 
membership was made, the leaders of the Turkish Cypriot community are fully 
conscious of the economic and social benefits that integration with Europe 
would bring their community. 
-23 -
47. This opinion has also shown that Cyprus's integration with the 
Community Implies a peaceful, balanced and lasting settlement of the Cyprus 
question - a settlement which will make it possible for the two communities 
to be reconciled, for confidence to be re-established and for their 
respective leaders to work together. While safeguarding the essential 
balance between the two communities and the right of each to preserve its 
fundamental Interests, the institutional provisions contained in such a 
settlement should create the appropriate conditions for Cyprus to 
participate normally In the decision-making process of the European 
Community and in the correct application of Community law throughout the 
island. 
48. In view of all the above and In the expectation of significant 
progress in the talks currently being pursued under the au$pices of the 
Secretary-General of the United Nations, the Commiss.ion feels that a 
positive signal should be sent to the authorities and the people of Cyprus 
conHrming that the Community considers Cyprus as eligible for-membership 
and that as soon as the prospect of a sett I ement is surer, the· Community is 
ready to start the process with Cyprus that should eventual·ly ~ead to its 
accession. 
49. The United Nations Secretary-General is aware that he can count on 
the Community's support in his continued endeavours to produce a political 
settlement of the Cyprus question. 
Even before such a settlement is forthcoming, the Commission 
undertakes to use al I the instruments available under the Association 
Agreement to contribute, in close cooperation with the CypriQt government, 
to the economic, social· and political transition of Cyprus towards 
integration with the Community. 
If the Council agrees, and in the hope of facilitating the conduct 
of the future accession negotiations, the Commission is wi IHng to begin 
Immediately talks with the government of Cyprus. These talks would serve to 
familiarize the Cypriot authorities with all the elements that constitute 
the acguis communautaire, partly in order to al low them to prepare their 
negotiating position under the best possible conditions and partly to permit 
an assessment of the need for any technical cooperation and assistance that 
their country might require to adopt and implement Community legislation and 
-24 -
the policies and instruments that wi I I be needed for Its Integration and to 
prepare the way, in due course, for the north of the island to catch up 
econom I ea I I y . 
The Commission also undertakes to examine the Issue of Cyprus's 
future institutions and their compatibi I ity with the requirements of active 
participation in the day-to-day running of the Community in the event of 
accession. 
50. The Community must ensure, moreover, that the general 
assessment to be carr led out in the context of the 1996 intergovernmental 
conference results in greater efficiency in the operation of the 
institutions of an enlarged Community -and one that could wel I be enlarged 
further -whl le at the same time providing Cyprus, and any other new Member 
state of asimilar size, with a guarantee that it will receive appropriate 
treatment In the decision-making process and in the discharging of Its 
responsibl I itles. 
51. Lastly, the Commission must envisage the possibi I ity of the failure of 
the I ntercommuna I ta I ks to produce a po Ii t i ea I sett I ement of the Cyprus 
question in the foreseeable future, in spite of the endeavours of the United 
Nations Secretary-General. Should this eventuality arise, the Commission 
feels that the situation should be reassessed in view of the positions 
adopted by each party in the talks and that the question of Cyprus's 
accession to the Community should be reconsidered in January 1995. 
1. 
2. 
3. 
4. 
s·. 
6. 
7. 
8. 
9.~ ., 
1 (). 
11'. 
12. 
13. 
.14. 
15. 
16. -A/1 -
PART TWO 
SPECIFIC ASPECTS 
Agriculture and f lsherles 
Internal m~rket and Industrial affairs 
customs and. indirect taxation 
Employment, working conditions and social affairs 
Competition 
Financial Institutions, company ·1aw and ~irect taxation 
Energy 
Environment 
Telecommunications 
Transport 
Enterprise policy and tourism 
Consumer policy 
lmpl !cations for the Community budget 
Cooperation In the fields of Justice and home affairs 
Regional pol Icy 
Statistics 
Stftlstrcal annexe•, Country Profile 
-A/2 -
1. AGRICULTURE AND FISHERIES 
I. AGRICULTURE 
Although agriculture in the southern part of the island accounts for 
only 7.2% of GDP and 12.8% of total employment, it sti I I provides 20% of 
total exports, which go mainly to the Community (75%) and comprise new 
potatoes, citrus fruit and grapes. Most farmers have an additional Job 
in one of the urban areas. 
In terms of cultivated area, non-irrigated agriculture is preponderant 
(cereals, fodder, olives, almonds and wine grapes), although it accounts 
for only 30-40% of production by value. The rest, i.e. the bulk, comes 
from irrigated farming and takes the form of lemons, bananas, fresh 
vegetables and table grapes. Cyprus imports cereals, animal feed, beef 
and veal and sheepmeat, and also milk products and sugar. 
Cypriot agr i cu I ture is strong I y organized and receives government aid 
and protection in various forms. The market is fairly extensively 
regulated. Production of wheat, barley and grapes receives direct 
subsidies; state or semi-state monopolies have been established for 
cereals, olive oil, potatoes and grapes; imports of milk are prohibited 
and beef and veal imports are covered by strict Quota arrangements; 
imports of the main agricultural and food products are still subject to 
a I icensing system -discretionary for the most part. Coordination 
between government and trade bodies is close and provides the necessary 
flex ibl 1 lty to feed the population plus the 2 mi 11 ion tourists who 
visited the island in 1992, for example. The Protocol on customs union 
signed In 1987 left this system largely Intact and put off completion of 
customs union for agr i cu I tura I products unt I I the f i na I stage between 
1999 and 2003. 
From the budget standpoint (see section 13), statistical analysis by 
productC1) points to the following estimated reQuirements in the event 
of accession: ECU 64 million in all, comprising ECU 25 million for 
cereals, ECU 14 million for sheepmeat, ECU 9 million for wine, 
ECU 8 mi I I Ion for fruit and vegetables, ECU 6 mi 11 ion for f lanl<ing 
measures and ECU 2 mi I I ion for oi I seeds. 
Accession would be unlikely to have any notable impact on production of 
the typically Mediterranean products, given existing production levels. 
If Cyprus wished to develop its agricultural production, it would have 
to do so through diversification. Early-season products such as 
potatoes and table grapes might even gain from access to the single 
market. On the other hand, the subsidy arrangements for grapes (and 
hence also for wine), price fixing and the ban on milk imports, import 
Quotas for beef and veal and also the various monopolies would have to 
be adapted. Imports from the mainland would probably increase and 
consumer pr Ices on the Cypr lot market wou Id probab I y tend to rise. 
(1) Assuming the fol lowing: 
(i) CAP reforms to apply in ful I as from the entry into force of 
the accession treaty; 
( i I) access ion to take p I ace at a point when the reformed CAP 
wi I I be fully operational. 
-A/3 -
I I. FISHERIES 
1. GENERAL 
The f lsher les sector in the southern part of the island makes only a 
marginal contribution to the country's economy (0.3% of GDP). 
As product Ion can not meet nat Iona I demand, Cyprus re Ii es heav 11 y on 
imports, which far exceed its exports; the resulting trade deficit was 
ECU 18. 3 mi I I ion in 1991 , i nc I ud i ng ECU 6. 2 m I I I ion in trade with the 
Community. Cyprus appl les preferential rates to Imports from the 
Community, but the Community grants no preferences to Cyprus, other than 
under the generalized preferences system. 
2. ADAPTATION TO THE ACQUIS COMMUNAUTAIRE 
The Cypriot authorities have proved themselves capable In the 
conservation and efficient management of stocks. The accession of 
Cyprus would, however, have to be accompanied by a strengthening of the 
necessary research and inspection resources (eQuipment, institutions and 
staffing). 
Given its size, the Cypriot fleet could probably be Incorporated Into 
the Community fleet without difficulty. It wi 11 be necessary to see 
that the loans scheme in this sector is in I lne with Community 
directives. 
The main problem concerning the Cypriot fishing fleet relates to the 
registration of fishing vessels with foreign owners. The Community will 
be unable In any circumstances to accept such a practice and flagging 
terms w i I I conseQuent I y have to be a 11 gned on those In force in the 
Commun I ty. 
Generally speaking, the aQuaculture sector In Cyprus Is marginal 
compared to that of the Community. However, the rapid development of 
fry product ion, espec i a I I y of sea bass and sea bream, may have some 
et fects on the hatchery sector In some Convnun I ty Med I terranean 
countries. 
Adopt Ion of every aspect of the common organlzat ion of markets could 
present administrative problems for Cyprus, as no legislation exists on 
pricing systems, trade bodies or marketing and Qual lty standards. 
The existing restrictions or prohibitions, the import I icensing system 
and the income support measures are contrary to established Community 
rules and practices. 
Lastly, the state aids which represent operational assistance for firms 
would also have to be abolished. 
-A/4 -
CONCLUSION 
The size and nature of the Cypriot fishing fleet are such as to suggest 
that its incorporation into the Community fleet would not be difficult. 
The hardest task for Cyprus would I le, from the administrative 
standpoint, in adopting al I aspects of the common organization of 
markets. 
-A/5 -
2. INTERNAL MARKET AND INDUSTRIAL AFFAIRS 
I. INDUSTRY IN CYPRus1 
Uni ike agriculture, industry has been of growing economic importance in 
the southern part of the island during the last ten years. In 1990, 
manufacturing Industry contributed 14.5% of GDP at current prices, 
accounted for some 20% of the employed workforce -estimated to number 
252 700 in 1990 -and provided 73% of total exports of locally produced 
products. The corresponding figures are lower for the northern part of 
the island, which possesses 25% of total industrial capacity, as wel I as 
the copper mines. In the north, manufacturing industry contributed 
11.5% of GDP at constant prices In 1991, accounted for 9.5% of the 
employed workforce and, in 1990, provided 54% of total exports. 
In the southern part, nevertheless, industry is less important 
economica I ly than the service sector, particularly tour ism and trade, 
which between them accounted for 21.3% of GDP in 1990. The service 
sector also has a higher growth rate, reaching 10% in 1988 and 1989, 
whereas manufacturing production growth slipped back from 7% in 1988 to 
3% in 1989 and 1990. The average growth rate for manufacturi-ng has also 
fallen back in the northern part since 1990, though for different 
reasons, from a level of over 15% to below 5%. 
Industrial development in the southern part wi I I depend on I ight 
industry, notably the clothing, agri-food, furniture, footwear and metal 
fabrication sectors, which account for 75% of total industrial 
production. 
In value terms, the food Industry is dominant (26.8% of industrial added 
value), fol lowed by textiles and clothing (18.5%). Leaving aside the 
two cement works in operation, the food industry also has the highest 
productivity and the heaviest investment. 
The biggest employer, on the other hand, is the textile and clothing 
sector, with 30% of the industrial workforce -against 18% for the food 
industry; It Is also the main export industry, with the Community as 
its chief market. The wood and furniture industry employs 12% of the 
workforce and accounts for 10.4% of added value. Chemicals are also 
important, employing 5.2% of the labour force and accounting for 7.3% of 
added value. 
Cypriot industry is dominated by family firms and is viewed by the World 
Bank as being seriously deficient from the standpoint of the technology 
in 
Detailed information on industry relates only to the situation In 
the southern part of the island. 
-A/6 -
use, workers' skills and production quality. Not having undergone any 
process of rationalization or special lzation, many Industrial firms 
would be. very vulnerable to international competition on both external 
markets and the domestic market. 
The studies on specific sectors carried out by the Commission on the 
basis of the information aval lable back up this assessment, particularly 
in the case of the footwear Industry, whose lack of competitiveness is 
put ·down to structural weaknesses such as absence of specialization, the 
shortcomings of labour (both skilled and unskilled), poor management, 
difficulties with supplies of raw materi~ls and lack of innovation. 
Chemicals, notably on the organic side, together with electrical and 
mechanica1 ·engineering, are also considered to be vulnerable, with 
Cypriot products in the latter two sectors being markedly inferior to 
Community products. 
Cyprus'ss dependence on external markets, especially the Community 
market, for its supplies of chemicals and also engineering, electrical, 
electronic and transport eQuipment should be noted. 
Notwithstanding· the measures already adopted to dismantle tariffs and 
approximate the Cypriot customs tariff to the Community customs tariff, 
Cypriot industry sti I I operates behind high tariff wal Is, duties of over 
50% be Ing not unusua I , even on Community products, In sectors where 
there exists a local Industry. 
Cypriot 1·ndustry also enjoys varied forms of official assistance for 
investm~nt and exports. The first category Includes exemptions from 
customs duty, tax concessions to promote the modernization of firms and 
the creation of Jobs for· graduates, faci I lties to encourage the 
establishment of firms in the seven Industrial and regional development 
areas -soon to be Joined. by three more -and also further tax 
advantages for firms setting up in the Larnaca free zone. On top of al I 
these there Is the government guarantee for industrial schemes helping 
to modernize local industry and make it more competitive, the granting 
of loans on favourable terms for Industrialists who moved from the north 
of the Island following the events of 1974, and grants for industrial 
firms setting up jn rural areas. Export aids take the form of export 
guarantee arrangements < gov·ernment guarantee for obtaining finance, 
export ~redit insurance), the halving of tax on export earnings from 
products manufactured locally, and the refund of customs duties charged 
on raw ma~erials used in the manufacture of export products. 
There has been I lttle encouragement in the past for foreign investment 
in industry, despite the fact that it can be a source of technological 
progress; in, the traditional industrial sectors, there are rules 
preventing· non-residents from taking a majority holding; In the most 
sens i t i v'e . 
" 
,,'<:.· 
-A/7 -
sectors, such as pumps and turbines, furniture, leather and footwear and 
the food Industry, the maximum holding is normally 24%; In exceptional 
cases It may r I se to 49%, If the proposed investment Is regarded as 
part lcular ly advantageous. However, the restr let ions do not apply to 
new Industries, nor to industrial or commercial projects geared 
exclusively to export. 
I I. ADAPTING CYPRIOT LEGISLATION TO THE ACQUIS COMMUNAUTAIRE 
Because of the lack of adequate information on existing legislation in 
Cyprus, It Is difficult at this stage to assess the extent to which 
approximation to Community legislation has already taken place. 
In the sphere of technical rules, i.e. standardization and conformity 
testing, alignment of Cypriot legislation on that of the Community is a 
priority target for the Cyprus authorities. It would seem that this 
alignment is either already partially under way or is being prepared. 
It will be necessary to check, however, whether the technical 
specifications currently in force in Cyprus are optional or mandatory, 
as this is crucial for assessing the arrangements for testing the 
conformity of products to technical rules. It should also be noted that 
Cyprus Is still not a party to the GATT Agreement on technical barriers 
to trade. 
With regard to Intellectual, industrial and commercial property, the 
Cyprus authorities point out that they have either already adopted 
measures to align local legislation on Community rules or that they are 
preparing such legislation. Nevertheless, it is considered that there 
are still gaps in Cypriot legislation where it should correspond to the 
Community acguls. 
Similarly, there wi I I certainly have to be changes in the rules 
currently governing public procurement, where the requirement for 
national preference is incompatible with Community rules. 
I I I. IMPACT OF ACCESSION ON CYPRIOT INDUSTRY 
The instruments providing the means for Cyprio-· industry to adjust to 
the Community's single market and the impl ~ations of the common 
commercial policy already exist. This is because, even while the 
accession of Cyprus to the Community is still only a possibility, 
appl icatlon of the Association Agreement and the 1988 Protocol providing 
for completion of the customs union by the end of the second stage wil I 
compel Cypriot industry to adjust progressively to a market open to 
competition not only from Community firms but also from non-Community 
countries. 
It would seem, however, that the Cypriot business community is adopting 
a wait-and-see po Ii cy; though fu 11 y aware of the need to reorganize 
their business methods, they are putting it off untl I competitive 
pressure starts to become a reality. It is impossible, therefore, to 
overestimate the need for the proper application, in accordance with the 
agreed timetable, of the 
-A/8 -
instruments referred to above. This would appear to be the best means 
of ensuring that Cypriot industry -given the vulnerability ·to which 
attention has already been drawn -is given a smooth preparat'lon for the 
new situation. 
As for Cyprus taking over Community legislation, the 19.88 Protocol 
ensures that certain principles of the EEC Treaty will be applicable in 
relations between the two parties In the context of the association. 
They Include the competition rules, tax provisions and the article on 
approximation of laws. It Is also stipulated that provisions for 
implementing these principles are to be adopted by mutual agreement not 
later than the start of the second stage. Hence this should hormal ly 
take place in 1998. The new period then beginning wU L provide an 
opportunity for any additional adjustments required. 
It is of vital Importance that the industrial restructuring and 
reorganization· programme being implemented by the Cypriot government be 
carried out effectively. The aim Is to help the productive sector 
become more f I ex I b I e and better adapted to the chang Ing cond It ions of 
the wor Id market. It shou Id be observed that the po Ii cy 1 nit i ated by 
the Cyprus government is geared to modern I zat ion of the ·ma-in existing 
industries, i.e. the food industry. clothing, footwear, .furniture and 
metal fabrication, rather than to conversion and the developm~nt of new 
industrial activities. 
-A/9 -
3. CUSTOMS AND INDIRECT.TAXATION 
I . CUSTOMS UN I ON 
In the event of accession, Cyprus wl 11 ~ave to adopt the whole of the 
Community customs acguls. Should Cyprus so request, transitional 
arrangements could probably be made,· w1·th a view to al lowing the 
Cypriots to adjust fully to the Common customs Tariff and the provisions 
of the Community customs Code. 
With regard to computerized customs clearance, the Cypriot 
administration is currently engaged in setting up a system .with a view 
to computerization of the tariff and Importers' data bases, the 
Introduction of the single administrative document and the automatic 
calculation of customs duties and VAT ·from ·this year onwards. This 
would constitute a first step towards the upgrading of procedures which 
wi I I be necessary to match Community standards. 
Along with the Common Customs Tariff, Cyprus would also have to adopted 
the Combined Nomenclature, which is considerably more .detal led than the 
Harmonized System currently In use In Cyprus. 
customs legislation proper, which forms part of secondary legislation, 
wi I I have to be adopted by Cyprus, subject naturally to certain 
adjustments during the transitional period. 
11. TAXATION 
1. Value added tax 
Since 1992 Cyprus has been operating a VAT system based on that of the 
Community. In principle it Is a single ra_te system which is notable by 
being very low, i.e. 5%. However, zero rating, I .e. exemptions with 
credit for previously paid VAT, Is applied to a range of goods and 
services such as foodstuffs, water supplies,- pharmaceutical products, 
newspapers, periodicals and books, children's clothing and footwear, 
urban and rural bus services, fertilizers and agricultural machinery, 
etc.-
As for the taxable person's right to deduction for goods and services 
used for the purpose of his taxable transactions, the rules are In 
general siml lar to those set out in the Community VAT legislat Ion. 
However, . arrangements for refund of VAT to taxab I e persons not 
estab 1· I shed in Cyprus st i 11 have to be enacted. 
Cyprus does not operate any flat-rate or slmi tar scheme for smal I 
farmers. However, farmers are not requ I red to register and most of 
their fnputs and outputs are covered by the zero rate. 
-A/10 -
The processing of the VAT returns Is computerized and is based upon a 
system developed for the Danish VAT system, adapted to Cyprus'ss 
requirements. 
The VAT system applied In Cyprus conforms In the main to the VAT system 
of the Community. In the event of Cyprus'ss accession certain technical 
adjustments would be needed, In part lcular as regards the rate level. 
Adjustments regarding the adoption of the new Intra-Community VAT system 
wi I I also be required. 
2. Excise duties 
In addition. to VAT, Cyprus levies excise duties on a I imited range of 
goods such as alcohol le beverages, tobacco products, mineral ol ls and 
soft drinks. In addition to customs and excise duties, Imported goods 
are subject to the payment of a temporary levy. This levy wi I I need to 
be abolished in the event of Cyprus'ss accession. Furthermore, imported 
goods will need to be treated the same way in respect of taxation as 
slmi lar domestlcal ly produced products. 
-A/11 -
4. EMPLOYMENT. WORKING CONDITIONS AND SOCIAL AFFAIRS 
The Information available would suggest that, broadly speaking, the 
accession of Cyprus would not raise major difficulties in the social 
sphere. 
The social situation In Cyprus Is comparable in many respects to that of 
the Community Member States and should enable it, In the event of 
accession, to take over the Community acguis in social matters without 
too many problems and with only a few adjustments. 
I . EMPLOYMENT 
For a long time there has been little unemployment, and the level has 
been stayed below the high Community rates of the last ten years. 
Neither women nor men are particularly disadvantaged by unemployment and 
there is relatively I ittle youth unemployment. Similarly, the long-term 
Jobless are few in number. 
I I. HEALTH AND SAFETY AT WORK 
Cypriot legislation is similar to that of the United K~ngdom. 
at present adopting draft legislation for transposing 
directives into national law. 
I I I . FREE MOVEMENT OF WORKERS Cyprus is 
Community 
The number of work permits Issued to Community nationals by the Cypriot 
authorities has been fairly stable since 1986. In 1990 nearly 9 OOO 
permits were issued, more than half of them to British nationals. The 
permits are valid for one year. 
IV. LABOUR LAW AND INDUSTRIAL RELATIONS 
Collective bargaining is the foundation of the Cypriot labour relations 
system and there is a strong tripartite tradition. 
Labour legislation is kept to a minimum: it forms a framework in which 
the main principles established are freedom of association and the right 
to strike. There is also some legislation on protection of certain 
vulnerable categories of workers on the labour market. 
-A/12 -
1 n the event of accession, Cyprus wou Id In any case have to adopt 
cert a In adjustments in Ii ne w Ith specific Community directives 
(ma I ntenance of workers· rights In cases of transfer of ownersh Ip of 
f lrms, and protection of w~ges or salaries due in cases of bankruptcy of 
employers). 
V. EQUAL TREATMENT FOR WOMEN ANQ MEN 
Here too, In order to be fully In line with Community law, Cyprus would 
have to. adjust somewhat its current legislation or contractual 
provisions In such matters a~ equal treatment, equal pay and the 
protect I on of pregnant ·women.. The same app I I es in the case of the 
directive on equal treatment fo.r m_en and women who are self-employed, 
including In farming. 
Application of the EEC soci.al security Directive (statutory systems) 
does not present major diff icultles; in occupational schemes there is 
sti I I a degree of dlscrimiriatlon. 
VI. EUROPEAN SOCIAL FUND 
In the context of aid granted under the Structural Funds, some 
operat Ions could be con~_idered as coming under Objective 1 and hence 
could take the form of operations to develop human resources (training 
and employment). 
Certain data would seem to-indicate significant Investment in 
implementing social policies. The percentage of GNP al·located to 
education and training (5.3% In 1990) compares to the Community average 
and is-bi'gher than in some Member States. I I literacy would appear to be 
non...:existent_ and the educational qualifications of people in employment 
seems to be fairly.hJgh: for example, 17% of the active population is 
of graduate ·I eve I. on· th~ c)'ther hand, the stay Ing-on rate for young 
people t;>etween 15 and 1'9 years of age Is rather low, as compulsory 
school Ing_ ends at the 'age ·of 15. Administrative services (notably the 
employment services) are of good quality. 
The above:-· cons tderat ions suggest that any operations undertaken to 
combat unemployment under the European Social Fund would be re I at ively 
margina·I from. the standpoint of the Community, though by no means 
negligible for Cyprus~ 
-A/13 -
5. COMPETITION 
1. COMPETITION RULES FOR COMPANIES 
The relevant legislation is the law to ensure competition, which was 
adopted In 1989 and entered Into force In June 1990. It reproduces the 
text of Art'tcles 85 and 86 of the EEC Treaty, and also certain 
provisions of Regulat Ion No 17. A close watch wl 11 have to be kept, 
however, on state-controlled undertakings, which are not covered by the 
I eg Is I at ion •. 
With regard to merger control, there Is a requirement that mergers must 
be_ notif led not later than 30 days after they take place, which raises a 
questionm~rk over the effectiveness of such supervision. 
Although 'there is as yet I lttle case-law, there has been one instance in 
the insurance sector, where the Commission objected to Joint pr lce­
f ix ing practices. 
The conclusion to be drawn from the foregoing is that the Cypriot 
legislat ton dat tng from 1990 approx I mates to that of the Commun I ty, but 
it ·Is -too ear I y to pronounce on the effectiveness of its imp lementat Ion. 
2. STATE AfDS -
Gover·nment . guarantees are given for a number of purposes (e.g. 
industr'lal 'i:>"r:OJects, tourism, exports). It Is not clear whether these 
guarantees are given under commercial conditions and whether In case of 
losses lncurre.d on guarantees the Cypr lot government claims from the 
recipient th~ amount due, If necessary by legal means. The above is 
especl'ally_important In the case of the export sector. If state aids 
are -Involved, H-should be pointed out to the Cypr lot author It les that 
the Cornmlssion does not approve of any aid for exports within the 
Communl.ty •. · 
Except -for special facilities for export-oriented companies and the 
tourist sector, no information has been given about a Id programmes 
directed. at specific sectors. However, it should be signal led to the 
Cypriot _authorities that schemes which grant aid to companies in general 
are restricted in what concerns aid to companies pertaining to 
industrial sectors covered by specific Community policy state~ents, and 
also aids to the agriculture, fisheries, transport and coal sectors.1 
1 Aid to the agriculture and transport sectors has not been subject of 
this analysis. 
-A/14 -
For the establishment of Industrial estates and free zones, the aid 
element must be evaluated and cumulation conditions with other aids must 
be specified. This may constitute· an operating aid, and such is 
normally not acceptable. In addition, the free zone may Include some 
export aid that would not be acceptable. 
No aid Is mentioned for R&O. If state aid for R&D Is granted to 
companies, the necessary information should sti I I have to be provided. 
As regards pub I ic undertakings and holdings in which the government 
participates several points should be mentioned. For example, it is not 
clear whether the conditions on the transparency of financial relations 
are fulfilled or whether the activities are in I ine with the 
Commission's communication on public enterprises in the manufacturing 
sector. 
A first assessment of the state aids situation in Cyprus shows that the 
information provided is sti I I Incomplete (tax exemptions, tax 
incentives, regional aids, loans for industrial restructuring, role of 
the Cyprus Development Bank, etc.). In view of the extent of the 
Cypriot e.conomy, the probable size of the companies involved and the 
nature of their activities, it Is however I ikely that in many cases the 
threshold of "de minimls" rules wi I I be exceeded. 
3. STATE MONOPOLIES -UNDERTAKINGS WITH SPECIAL OR EXCLUSIVE RIGHTS 
A. Trading monopolies 
There are monopolies In Cyprus for electricity, oil and wine. Various 
restrictions relating to these monopol les are clearly contrary to 
Article 30, 34 or 37 of the EEC Treaty. 
B. Public undertakings 
The Cypri'ot authorities contend that there is full transparency of 
financial relations between public authorities and public undertakings. 
but no details appear in the aval lab le information. 
In the. telecommunications sector, the Cyprus Telecommunications 
Authority (CTA) is the only authorized body for the provision of 
telecommunications services in Cyprus. The Cypriot authorities 
recognize that the present legislation would be incompatible with 
Community law. Some further liberalization Is also needed in the field 
of telecommunications equipment. 
The posta I serv Ice has an over a 11 monopo I y, except for express ma i I 
services, which are provided both by the public service and by private 
firms. The Cyprus government is at present examining the legal 
framework for the postal service with a view to institutional reform. 
There do not appear to be any special or exclusive rights in Cyprus for 
air or sea transport. 
-A/15 -
6. FINANCIAL INSTITUTIONS. COMPANY LAW AND DIRECT TAXATION 
On the basis of the available legislative Information which ls quite 
I imlted the situation appears to be as fol lows.1. 
I. BANKS 
The Central Bank of Cyprus has prepared a new banking bi II, the purpose 
of which ls to modernize banking practice and align It with most EC 
banking legislation. 
EC banks appear to receive national treatment as regards both 
establ lshment and the carrying-on of activities. Two EC banks have 
branches In Cyprus and one is incorporated as a subsidiary. The 
establishment of offshore business2 is also al lowed for foreign 
financial services firms, subject to specific conditions. 
II. INSURANCE 
EC insurance companies appear to receive national treatment as regards 
both establishment and the carrying-on of the activities. They may be 
estab Ii shed as either a subsidiary or as a branch. The number of EC 
insurance companies present is 25, onshore and offshore. 
Ill. SECURITIES 
The present Cyprus securities market is an unoff lcial over-the-counter 
market, which does not have any EC presence. 
A stock exchange bi I I has been submitted to Parliament providing for the 
development of the securities market~ the establishment and operation of 
a Cyprus Stock Exchange, the establishment of a Stock Exchange Council 
and other related matters. This proposal does not contain any reference 
to access or to operation by foreign companies. 
IV. CQMPANY LAW AND DIRECT TAXATION 
The Commission is not in the possession of any legislation pertaining to 
company law and direct taxation. 
V. ASSESSMENT 
It Is not possible to assess at this stage which specific points 
concerning the application of Community law pertaining to financial 
institutions, company law and direct taxation will need to be addressed 
In the accession negotiations. Although the laws of Cyprus generally set 
the framework for national treatment pertaining to establishment and the 
carrying-on of activities, the legislation does not go as far as EC 
legislation, so the fol lowing comments are called for. 
1 OnlylvaAcduferceanuhaa~aiaet of the island. 
2 Offshore banks are licensed to carry on banking business from within 
Cyprilbe batqwhs I t:.>mmnauta::itf:shmrsrt: t:Ds i accalla~at bJrnlChl;usus l-blmseis 
rest U et et1.t I ., x d lnJB 8neht a t>ion p rtSm:mei:rfanrU y tle <lldi war e:d Wlm" ar es hoot 
permpeerhd>d ms itdsret&ooa I ltne t 6e~rtazprdfl ttCyt:JJ~I and amn i clisteat i ve 
otheadl~lattbe.C}¥Pnlet~rtttansitional period should be of strictly 
-A/16 -
limited duration, sensitive questions could arise regarding the 
capacity of the authorities of Cyprus effectively to apply the 
prudential regime imposed by the Community directives. 
2. Aoproxlmatlon of laws 
The Association Agreement with Cyprus does not contain 
provisions relating to financial services, company law or direct 
taxation. Although Cyprus has decided to align its legislation 
with Community law in these areas specific efforts appear only 
to have been made In the banking area. Cyprus should be 
encouraged to align Its legislation in the other areas as 
quickly as possible, as this would only faci I itate the accession 
negotiations. 
VI. CONCLUSION 
It would be useful if the authorities of Cyprus could be persuaded to 
continue and Intensify the exercise of approximation of laws in the area 
of financial Institutions, company law and direct taxation. 
-A/17 -
7. ENERGY 
1. Cyprus has no indigenous energy resources and is therefore 
completely dependent on imported energy, particularly oil, with 
50% of export earnings being spent on petroleum products. There 
Is some scope to develop hydroelectric power and other 
renewables such as solar power heating, which is already well 
estab I I shed In the domestic sector. Tota I f i na I energy 
consumption In Cyprus is 1.2 mill Ion toe (1990) compared to 723 
million toe in the Community (12). Energy intensity in Cyprus 
(gross Inland consumption /GDP) in 1990 was 610, more than 
double the EC figure of 286. Cyprus is taking steps to 
encourage energy efficiency and conservation to reduce the 
growth in energy demand. This is done main I y by the private 
sector w Ith support I ve measures and f i sea I I eg is I at ion by the 
government. 
2. Electricity power generation (+/-500mw) is oil-based and uses 
about a third of oi I imports. Electricity generation and supply 
is the sole responslbi I ity of the Electricity Authority of 
Cyprus, which supplies the whole island, for which there is an 
integrated grid network, an important link between the two parts 
of the island. A major problem for this Authority Is the 
unbi I led consumption of electricity suppl led to the Turkish 
commun I ty. 
3. In the event of accession to the Community, Cyprus may have some 
difficulty in meeting the Community's crisis and stock 
d I rect Ives. It is not a member of the I nternat Iona I Energy 
Agency. Moreover. at the moment stocks to meet only around 30 
days ol I consumpt Ion are held. lnformat Ion on the north of the 
Island Is not avai I able. Given Its vulnerabl I ity to 
developments in oil markets, the government is currently 
reviewing this situation. Cyprus may also find difficulty in 
conforming to directives prohibiting the development of new oil 
based generating units in the future expansion of its 
electricity generating system. As regards the environmental 
impact of energy use. at the moment power generators do not 
operate in conformity with EC directives, although steps are 
being taken to remedy this. 
4. In conclusion, given Cyprus'ss island situation, somewhat remote 
from the existing Community of twelve, Its energy situation wi I I 
have I ittle Impact on the Community's energy situation and 
present energy po I icy deve I opment . On the other hand Cyprus 
wi II have to adapt or introduce legislation to meet EC 
requirements in the energy sector. 
-A/18 -
8. ENVIROt&tENT 
It can be said that there Is no major environmental problem In Cyprus. 
G I ven the spec If I c geographic, c I I mat I c and economic cond it Ions, some 
Issues are of more particular importance than others, for instance : 
ensuring a sustainable development of industrial, tourist and 
agricultural activities, protection of the scarce water resources, 
preservation of the quality of the marine environment and of the natural 
assets of Cyprus, AND management of waste. 
Existing contacts between the Community and the Cypriot authorities show 
the obvious wl 11 ingness and also the capacity of Cyprus to conduct a 
sound environmental pol Icy, based on its integration with the overal I 
development policy. Approximation of Cypriot environmental policy and 
legislation with those of the EC is actively sought and has already 
taken place in some f lelds. 
The most recent environment-specific legislation adopted or planned for 
adoption Is based on principles in I ine with relevant EC legislation. 
This concerns areas such as water and atmospheric pollution, dangerous 
substances, noise or Industrial effluents. 
Therefore one may well conclude that as long as this trend is followed 
and cooperation between the EC and Cyprus continues on the same basis, 
Cyprus would not meet any major difficulty in integrating EC 
environmental po I Icy and leglslat ion Into its system in the event of 
accession. It would only benefit from the expertise and experience 
acquired already at EC level, including in areas not yet tackled by 
Cyprus. 
-A/19 -
9. TELECQMMUN I CAT I ONS 
The Information available Indicates that the current legislation 
covering telecommunications, which confers on the CYTA1 both regulatory 
funct Ions (or the respons I b 111 ty for prepar Ing dee Is Ions) and 
operational functions, and also gives It a monopoly over the supply of 
services, Is Incompatible with Community rules. Should negotiations 
take place on accession, the Cypriot authorities would have to adopt 
appropriate measures In this respect, subject to the usual transitional 
provisions. 
In many other respects, however, accession would raise no particular 
difficulty. An example ls standards, where the CYTA applies both 
international standards and those set by ETSl,2 of which Cyprus was a 
founder member. The same applies to telecommunications terminal 
equipment, for which the market was liberalized In 1989. 
Moreover, in the southern part of the island the network Is wel I 
developed. With 46 direct I Ines for every 100 inhabitants, Cyprus 
stands slightly above the overall average for the Community and EFTA 
(43); In add it Ion, new serv Ices cover Ing data transm i ss Ion, fax and 
mob lie phones are already available. 
1 Cyprus Telecommunications Authority. 
2 European Telecommunications Standards Institute. 
-A/20 -
10. IRANSPORT 
I. ROAD TRANSPORT 
WITH regard to market access, pub I ic transport in Cyprus Is 
subject to licences. A majority of Member States have signed 
International road transport goods agreements with Cyprus. 
In the areas of social legislation, technical standards, taxes 
and road safety, there exists a legal basis. Current legislation 
concerning environment and pub I le health Is minimal. 
I I . SEA TRANSPORT 
Conditions for the establishment of shipping companies in Cyprus 
and accession to Its flag are too loose as compared with those 
generally appl led by EC Member States. 
Operating conditions under the Cyprus flag may raise problems of 
distortions of competition due to low taxation and non-existence 
of manning nationality requirements. 
Moreover, the degree of imp I ementat ion of i nternat Iona I 
standards of safety and pollution prevention differs from the 
Community fleets' average. 
111 .AVIATION 
Air transport is largely governed by traditional bi lateral 
agreements. Cyprus has signed 35 bilateral agreements, Including 
with all EC Member States. Cyprus is a signatory of the ICAO as 
wel I as of Eurocontrol and ECAC agreements. 
Regarding market access and ownership and air fares, 
restrictions are much less apparent in the Community than they 
are in Cyprus. 
CONCLUSION 
In the course of any accession negoclations, the fol lowing would have to 
be discussed in detail : 
Road transport legislation on social aspects, environment, 
public health and technical standards. 
Maritime transport cargo reservation, conditions for 
registration and the implementation of maritime safety and 
pollution prevention standards. 
Aviation 
process. the legislation concerning the liberalization 
-A/21 -
11. ENTERPRISE POLICY AND TOURISM 
The Cypriot economy is dominated by smal I and medium-sized enterprises. 
Enterprise policy is general in nature, rather than being targeted 
according to the size of businesses, as this meets the Cyprus 
government's main alms of encouraging Investment in rural areas (by 
means of grants), stimulating exports (through guarantees and grants for 
missions) and implementing industrial projects (guarantees, grants for 
studies on restructuring). 
Since mld-1992 Cyprus has been connected to the BC-Net network and It is 
planned to set up a Euro-Info Centre in 1993/94. 
The recent growth of tourism in Cyprus is impressive. For example, both 
the number of beds and the number of tourists visiting the island more 
than doubled between 1985 and 1990. 
Since 1990 the government has been pursuing a tourism policy aimed at a 
more targeted growth in tourist numbers and also a more varied range of 
tourist attractions, with the aim of achieving a more even spread of 
tourist visits throughout the year. 
This Is entirely consistent with Commission policy in this f leld. 
CONCLUSION 
It Is clear from the foregoing that the accession of Cyprus would not 
present any special problems in respect of enterprise pol Icy or tourism. 
-A/22 -
12. CQNSUMER POLICY 
1. Health and safety 
The Information available does not permit a conclusive assessment 
regard Ing the genera I safety of products. It wou Id appear, however, 
that the rules In force In Cyprus would have to be revised completely In 
order to be brought into line with the relevant Community directive. 
The current regulatory situation in Cyprus with regard to cosmetics is 
incompatible with Community rules. 
2. Consumer transactions 
There does not appear to exist any legislation at present comparable to 
the Community legislation on the following: misleading or comparative 
advert Ising, package holiday tours, t imeshar ing, contracts other than 
those negot I ated in commerc i a I estab Ii shments and unfair c I auses in 
contracts. It would therefore be necessary to incorporate the Community 
directives Into Cypriot law. 
3. Information and orotection of consumers' economic interests 
In the case of textiles, the provisions contained in the Community 
directives have to a large extent been incorporated Into Cypriot 
legislation, but gaps -major ones in some cases -still exist. It 
would also appear that the Cypriot rules concerning labelling of 
products and ana I yt I ea I methods used in conformity test Ing are mere I y 
optional, and this would not be acceptable. 
Cypriot legislation on the labelling of foodstuffs does not present any 
special problems, even though generally speaking it falls short of the 
relevant Community directives. 
In the matter of the pricing of foodstuffs and non-food products, 
Cypriot legislation is far removed from the relevant Community 
directives and major adjustment efforts would be required. 
To sum up, the accession of Cyprus would entai I adjustments to Cypriot 
legislation on consumer policy, and in some cases the adjustments would 
be substantial. 
-A/23 -
13. IMPLICATIONS FOR THE COMMUNITY BUDGET 
The estimate of the budget Impact was drawn up on the assumption that 
the Commun I ty acgu Is w 111 app I y, and on the basis of the Commun I ty 
budget adopted for 1992. 
It was not possible to allow for any dynamic aspects of the Impact of 
access I on on the econom I c structure of Cyprus, 1 the main features of 
which from the budget standpoint are as fol lows: 
( I) 
( I i ) 
( i i I) agricultural production accounts for some 7% of gross domestic 
product and falls short of ensuring self-sufficiency, as 
Indicated by the fact that Imports of agricultural products 
exceed exports by over 20% In value terms; 
external trade Is substantially in deficit because of the 
considerable need for intermediate products to be used in 
production and the demand for manufactured consumer goods. 
Trade wl th the European Community accounts for over ha If of 
total trade flows; 
GNP In Cyprus Is equivalent to some 1% of that of the Community, 
which corresponds to a oer caoita average of 48% of the 
Community level. In the northern part of the Island, the 
average Is only one third of the level in the southern part 
(viz. 19% as against 55% of the average per capita Community 
GNP). 
In the light of all this the following quantified estimates have been 
arrived at: 
1. Expenditure 
A. Agricultural expenditure 
A basic calculat Ion was carr led out by product In the I lght of the 
recent developments In the common agricultural policy. The assumptions 
used concern both economic parameters (production, consumption, trade, 
unit assistance rates, and so on) and structural ones (numbers of 
persons involved in agriculture, herd numbers, and so on). 
Total requirements were estimated at some ECU 60 million, Including 
ECU 24 ml I I Ion for cereals and ECU 14 mil I ion in the sheepmeat sector. 
These figures are a guide only, since the statistics available are not 
sufficiently detailed. 
E.g. changes in trade flows or the structure of agriculture. 
-A/24 -
B. Structural Funds 
Given the average per capita GNP of Cyprus, applying the amount of aid 
per head of population for Greece, taking all regional and social 
assistance (Including IMPs} together, to the population of the Island 
results In a figure of around ECU 120 ml I I ion, the distribution of which 
between the two parts of the island would be establ I shed at the 
appropriate time. This figure covers contributions from the regional 
funds, the Social Fund, the EAGGF Guidance Section and assistance for 
the f lshery sector. 
c. Other policies 
Applying the GNP ratio In respect of Industrial policy expenditure and 
the population ratio In respect of administrative expenditure results In 
figures of ECU 3 ml I lion and ECU 4 ml I I Ion respectively. 
D. Language 
In present circumstances the accession of Cyprus would Involve a further 
language- (Turkish} which would require some 200 translators and 
Interpreters at an annual cost of around ECU 8 mi I I ion. 
2. Income 
Own resources as trad It Iona 11 y def I ned wou Id br Ing In an est I mated 
ECU 55 ml I I Ion, given the level of trade, and would compr lse 
ECU 8 mill Ion from farm levies and ECU 47 million from customs duties. 
At the same time accession would result in an estimated drop In budget 
receipts of ECU 6 ml I I Ion. Resources from VAT and GNP would bring in 
ECU 39 million and ECU 14 mll I Ion respectively. 
CONCLUSION 
In budget terms the accession of Cyprus might result In Increased 
expenditure of ECU 195 million, notably on account of payments from the 
Structural Funds. Income would increase by ECU 96 mi I lion, however, due 
allowance being made for the loss of duties and levies on trade between 
Cyprus and the Community and the costs of collection. Overall, 
therefore, accession would represent an additional budget cost of some 
ECU 100 m I I I I on. 
-A/25 -
14. COOPERATION IN THE FIELDS OF JUSTICE AND HOME AFFAIRS 
1. The Cyprus government has undertaken to meet al I obligations and 
responslbllltles deriving from the Treaty on European Union. 
This Imp lies acceptance by the Cypriot authorities of al I 
dee Is Ions concern Ing cooper at Ion in the f I e Ids of Just Ice and 
home affairs as set out In Title VI of the Treaty on European 
Union. 
2. The Involvement of Cyprus in the obligations resulting from 
Title VI of the Treaty could entail a major effort on the part 
of the authorities of the island in order to ensure that al I the 
necessary means are employed so that fu I I cooper at ion in the 
areas concerned becomes a rea I i ty. The ex tent of this effort 
can be established only by Joint examination of the details of 
the relevant acauis. 
-A/26 -
15. CQtA4UNITY REGIONAL POLICY 
Given the total population (around 700 OOO) and the average size in 
population terms of the NUTS II regions of the Community, Cyprus would 
constitute a unique NUTS II reglon.1 Under Community rules the regions 
eligible under Objective 1 of the Structural Funds are NUTS II regions 
whose oer caolta GDP Is, over the last three years, less than 75% of the 
Community average. 
According to the various estimates available, it would appear that 
Cyprus as a unique NUTS I I region, could be included under Objective 1. 
1 NUTS: Nomenclature of Territorial Units for Statistics, subdividing 
the territory of the Community into statistical regions. 
-A/27 -
16. STATISTICS 
on the basis of the limited information available and the few bilateral 
contacts there have been In the past, the s I tuat ion appears to be as 
fol lows. 
THE CYPRIOT STATISTICAL SYSTEM 
The stat i st i ea I system of Cyprus is based around the Department of 
St at i st I cs and Research CDSR) wh i eh Is a separate department of the 
Ministry of Finance. It was founded under the British colonial 
administration. Since Independence In 1960 the government has drawn up a 
succession of f lve-year development plans in statistics. 
The DSR fulfl Is a role similar to that of a central lzed national 
statistical office in one of the Member States. We have I lmited 
knowledge of the workings and resource base of the DSR, but its 
pub I lcatlons have a full set of statistical information in the economic, 
agricultural and social fields. 
STATISTICAL LAW 
As In many EC Member States there is a legal act underpinning 
statistical activities. This was passed in 1968 and empowers the DSR to 
co I I ect any necessary sta t I st I ea I I nf or mat I on and protect its 
confl.dentlal nature. This outlines the rights and responsibilities of 
the DSR. The subject of confidentiality Is becoming increasingly 
Important with Community statistics. 
ASSESSMENT 
Given the size of the country, Cyprus has a relatively well-developed 
statistical system which could, given the necessary resources, be 
adapted to the statistical acguls after a reasonable transition period. 
The subject areas covered by the DSR are broadly in I ine with the 
statistical requirements of the Community. There Is, however, no guide 
to the quality of the statistics produced (this Is particularly 
Important In the f lelds such as national accounts where statistical data 
are used to determine contributions to the EC budget). This type of 
lnformat Ion would have to be obtained at the t lme of the start of 
membership negotiations. 
-A/28 -
LIST OF TABLES 
1. GDP/Inhabitant at current prices and exchanges rates 
2. GDP growth In Cyprus and the EC. 1978-1992 
3. Unemployment In Cyprus and the EC, 1978-1991 
4. Investment/GDP ratio In Cyprus and the EC. 1978-1991 
5. Public deficit (%of GDP) 
* * * * * 
GDP/inhabitant at current prices and exchange rates 
,.. (% of EC average). 
80 
70 
60 
'.)0 
•W PORTUGAL 
1· •••o:yo••n• ;I' 
I I 
:w .f. I '-'0 ,) 
1982 1983 1984 1985 1986 1987 1988 1989 1990 
Sources IFS & EUROSTAT )> 
......... 
N 
'° 
-A/30 -
GDP growth in Cyprus and the EC 1978 -1992. 
Arinual volume growth, % p/a 
1978 1980 1982 1984 1986 1988 1990 1992 
Sources; EUROSTAT, EC Commission services, Cypriot Ministry of finance. 
-A/31 -
Unemployment in CYPRUS and the EC, 1978 -1991 
EUR12 
1978 1980 1982 1984 1986 1988 1990 
Source: EUROSTAT (EC) and national sources (C'yprus). 
40 
30 ! 
I 
1 
! 
' ! 
20 L 
10 -A/32 -
Investment/GDP ratio in Cyprus and the EC 1978 -1991 
% of GDP; current prices 
0 78/81 0 82/86 1987 1988 1989 1990 1991 
~Cypr~s .EC 
Source: EC Commission services, Cypriot Ministry of finance. 
-A/33 -
PUBLIC DEFICIT 
% of GDP 
-1 
-4 ,,_ ______ __ 
1981 1983 1985 1987 1989 1991 
Sources: EC Commission services. Cypriot Ministry of finance. 
-A/34 -
CYPRUS -PROFILE 
I. Area : 9.250 km2 
II. POPUiation 700.000 en 1990 dont population active 277.000 
Ill. GDP per Capita : 9.000 Ecus 
IV. GDP Growth Rate 
8,6% 8,3% 6,5% 1% 8% 
v. Inflation Rate in 1991 5. 1 
VI. Unemployment: 1 ,8% en 1991 
VII. Structure of employment and GDP in 1990 <X> 
Agr i cu I ture 
Industry 
Services 
Construction 
VI. Trade Relations (en mio US$) 
Imports 
Exports 
Trade Balance 
NB : Tourism incomes 
Trade structure ( X of 1991 total) 
Manufactured Goods 
Transport Equipment 
Food Products, Beverages 
Mineral Fuels 
CQnnunltY Share in 1991 
-In Cypriot Exports 
-in Cypriot imports 
EEC-Cyprus Trade (MECU) 
Imports 
Exportats 
Trade Balance 43,4% 
51 ',., Emploi 
14% 
20% 
57% 
9% 
2621 
951 
-1670 
1243 
lmoorts 
34% 
28% 
15% 
10% 
596 
2029 
1433 Origine du PIB (X) 
7% 
15% 
68% 
10% 
Exports 
41% 
12% 
35% 
5%