With the continuing devaluation of the Turkish pound and the loss of the purchasing power of the Turkish Cypriots, the question is slowly being raised in diplomatic and economic circles inside and outside Cyprus, whether it is right for the Turkish Cypriot community to gradually adopt the euro. This is of course not an easy task as it requires preparation on the basis of European rules on the one hand and eurozone rules on the other. Under the title “Unilateral vs Bilateral Euroisation: Political, technical and practical issues in the curious case of northern Cyprus”, Professor Mete Feridun analyzes in the international journal Modern Diplomacy, both the difficulties that exist in relation to the above project and some solutions to solve problems.
As the professor notes, although the bilateral adoption of the euro is not foreseen until the reunification of the island, the northern part of the island could technically adopt the euro unilaterally. He acknowledged, however, that this could lead to complications in the future, as the EU is adamant about bypassing the stages set out in the Maastricht Treaty.
The adoption process
Fete Feridum explains that “northern Cyprus” can link its national currency to the euro and with the consent of the European System of Central Banks, and set a “central exchange rate” and a “margin of departure” under the Exchange Rate Mechanism. Exchange rates II for a period of at least two years. It goes on to say that in the event of success based on its performance in ERM II, a final exchange rate will be set and the redistribution will take place during a transitional period. Nevertheless, he states that the only way for this to happen and for the intentions of both the EU and the Turkish Cypriot community to be transparent is for there to be a dialogue between the parties involved.
The professor cites as an example Kosovo and Montenegro, which did not have a sovereign state at the time. In both cases the decision was taken in 1999. “Kosovo designated the German mark as the designated currency, which was replaced by the euro in 2002. Similarly, Montenegro introduced a parallel monetary system in 1999, in which the German mark was allowed to circulate in parallel with the then legal money. “In 2001, the German mark became the only legal tender and was replaced by the euro in June 2002,” he said.
Mete Feridun points out that in the case of Montenegro, which is now officially a candidate for EU membership, the adoption of the euro without an agreement with the European Central Bank was recognized by the European Commission as a measure to be taken due to the “extraordinary circumstances” prevailing. in the country at that time. “This could be a precedent for 'northern Cyprus'”, he notes characteristically. The professor explains that given that “northern Cyprus” is already EU territory, the adoption of the euro could be considered a “common EU interest” and, therefore, there could be an exception. He went on to say that the EU's policy towards the Turkish Cypriot community, set out by the General Affairs Council in 2004, was that “the Council is determined to… facilitate the reunification of Cyprus by encouraging the economic development of the Turkish Cypriot community”.
The professor explains that in addition to exchange rate stability, the convergence criteria also include price stability, sound public finances and the convergence of long-term interest rates. It is recalled that in terms of public finances, the Maastricht Treaty presupposes that the budget deficit should not exceed 3% of GDP, while public debt 60%. This is very important for the Turkish Cypriot side, says Feridun, because it must ensure the financial viability and resilience of the Turkish Cypriot economy.
Therefore, in the case of “northern Cyprus”, Feridun argues that the adoption of the euro could mean that the Turkish Cypriot community must first introduce its own currency. “This could be a more viable alternative and 'northern Cyprus' could then link its currency to the euro in preparation for a possible changeover to the euro,” he explains.
At the end of the analysis, Metem Feridun clarifies that any decisions taken will be at the level of the European Council but also at the level of leaders, which he admits is quite difficult at this time after the collapse of the Crans Montana talks.
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