EU's easternmost country, just 0.2% of eurozone economy, takes helm amid rows with Turkey and over UK enclave
Perched on a bluff high above the sea, the ancient theatre at Curium is among Cyprus's most spectacular sites. It is here, at 8pm on Thursday, that the Mediterranean island will officially launch its first EU presidency with Europe's great and good gathering in the dramatic setting.
Cyprus is the EU's most easterly point and, at the height of the continent's debt woes, the European commission president, José Manuel Barroso, and other senior mandarins are keen to put on a display of solidarity. Even cushions are being provided to ensure that the assembled dignitaries are protected against the Greco-Roman theatre's famously flinty steps. But no amount of comfort will hide the fact that Curium – once the favoured site for many a gladiator fight – was chosen precisely because it lies outside the EU, on the Akrotiri "sovereign base area", a slither of territory that is technically British.
For the president, Demetris Christofias, who will address the audience, the military reserve – among 99 square miles retained by Britain when the island won independence in 1960 – is a "colonial bloodstain". The veteran communist, like many on the left, wants the area – excluded from the EU when Cyprus joined the bloc in 2004 – to be returned to the former crown colony. In holding the takeover ceremony at Curium, he hopes to reassert the point.
It is vintage Christofias. Alone among EU leaders, the 65-year-old Cypriot politician still believes in the tenets of Marxist-Leninism. Assuming the EU presidency at a time of unprecedented upheaval for the 27-member union is by far the biggest challenge for a state that is not only young but, 38 years after a Greek-triggered Turkish invasion, divided to boot. For the first time ever an EU aspirant – Turkey – does not even recognise the country now heading the bloc. Since 1974, some 35,000 Turkish troops have been stationed in the pariah state of northern Cyprus, which is bankrolled by Ankara.
But for Christofias, the role of EU council president may well be a respite from a term in office that has also been plagued by misfortune. "Outside his own diehard supporters he no longer has any credibility," said Hubert Faustmann, who teaches political science at the University of Nicosia. "There is huge disaffection with his government … he is now perceived as the worst president to hold public office in the history of the republic."
Barely a week before taking over the presidency, Cyprus was forced to follow Greece, Ireland, Portugal and Spain in resorting to both the EU and IMF for emergency financial assistance. On Wednesday, as a 30-strong team of inspectors began poring over the island's accounts, it became glaringly apparent that the aid injection might be much bigger than initially expected. Reports suggested that as much as €10bn – more than half of Cyprus's total €17.3bn national output – could be needed only to shore up Cypriot banks badly hit by exposure to Greece. More would be required to rescue the economy.
The irony has not been lost on other EU states that a "broke and bankrupt" member, whose economy represents a mere 0.2% of the eurozone, is now at the helm of policy-making just when Europe faces its greatest hour of need. Suspicions that Christofias might not be the man to navigate the crisis have been further underpinned by his government's determination to seek loans from Moscow and Beijing in addition to rescue funds from the EU.
The decision to reach out to Russia and China – countries the Moscow-trained president openly admires – has raised doubts over the island's allegiances at such a delicate time.
"It is the sovereign right of every country to look for bilateral loans," the government spokesman Stefanos Stefanou told the Guardian. "We will have more options to finance our needs. And nobody [in the EU] has said anything."
In Brussels, officials beg to differ. The woeful state of Cypriot finances has been widely blamed on Christofias, who has spent four of his five years in office refusing to enact punishing reforms that would affect his Akel party's traditional powerbase in the unions and public sector. Instead of reining in a civil service that accounts for a whopping 31% of state expenditure, the sector has continued to grow with employees enjoying formidable state largesse. Shortly after taking office the communist president ensured that Cyprus's overstretched diplomatic corps opened an embassy in Cuba.
The economy took a further blow when a massive blast at a munitions dump last August knocked out the island's largest power station, resulting in widespread electricity cuts. The explosion, which killed 13 people including the commander of the country's navy, was described as "a catastrophe of biblical proportions" by Christofias who was subsequently held responsible for failing to ensure that adequate protective measures were enacted to prevent the blast. Instead of resigning, the leader vehemently denied the accusations and stayed on.
With less than eight months before presidential elections are held again, Cypriot officials have warned potential creditors that there is little appetite for the stinging austerity meted out to the nation's cousin in Greece. "We have highlighted the need that they be particularly careful concerning issues of social and political cohesion," said the finance minister, Vassos Shiarly, after holding talks with visiting inspectors from the EU, ECB and IMF.
The Cypriot government has vowed not to allow "the Cyprus problem" to become an over-riding issue during its six-month stint at the helm of the presidency. But there are few who would contest that had the island been reunited between its majority population of Greeks in the south and Turks in the north, the economic turmoil it now faces may not have been so worrying. As a moderate, Christofias was widely seen as the biggest hope of resolving the west's longest-running diplomatic dispute. In her air-conditioned office in the divided capital, the foreign affairs minister Erato Kazakou-Marcoullis lamented this week that after 130 meetings between leaders from both communities and another 150 between chief advisers from either side, UN-brokered negotiations were "in deadlock".
It is a sad reality that those attending the celebrations in Curium will doubtless prefer to ignore.
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