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Cyprus' isolated north will be enthusiastic _ if unofficial _ euro users

Cyprus' isolated north will be enthusiastic _ if unofficial _ euro users

Cyprus' adoption of the euro on Tuesday will not officially apply to Turkish Cypriot clothing merchant Kemal Altuncuoglu _ or to anyone else living in the breakaway north of the Mediterranean island.
But Altuncuoglu and his compatriots, chafing at decades of isolation, will be among the euro's most enthusiastic new users, even as the Turkish lira remains their primary currency when the Greek-speaking south adopts the euro on Jan. 1.
"We can give change in euros, no problem," the 44-year-old Altuncuolgu said, tapping on his calculator to convert the price of a blouse from lira to euros.
"We don't feel like we're being left out," Altuncuoglu said at his shop, tucked within the 16th-Century walled old city of Nicosia, the divided capital of both communities. "We feel European."
Businesses in the north _ many of which already take euros or Greek Cypriot pounds, particulary the casinos _ are taking a euro-friendly stance. Some have even called for unilaterally adopting the euro, which also goes into use in Malta on Jan. 1 to bring the number of countries using the currency to 15.
Only the Greek side, however, has joined the European Union and so is eligible to officially adopt the euro currency.
The island has been divided since 1974, when Turkey invaded northern Cyprus following a failed coup by supporters of union with Greece. The Greek side voted in a referendum against unification just before it joined the EU in 2004, effectively blocking the north from enjoying EU benefits.
The breakaway state in the north, recognized only by Ankara, was sealed off from the rest of Cyprus for three decades until 2003, when Turkish Cypriot authorities opened crossing points along dividing buffer zone.
Since then, cross-border commerce has flourished, with Greek Cypriots heading north for bargains and less-restricted gambling, and Turkish Cypriots commuting south for construction jobs. Many businesses in the north now use the euro for cash transactions instead of the more volatile lira. And the casinos happily accept Greek Cypriot pounds, euros and other foreign currencies.
"We use euros to purchase appliances, cars, construction materials," economist Ali Erel said. "The ordinary man on the street is more used to using foreign currencies than any Greek Cypriot."
Erel heads a Turkish Cypriot association promoting closer integration with the EU, and proposes making the euro the de facto currency in the north, even without approval from the European Union.
"You don't need EU permission to start using the euro ... that's what we're proposing," Erel said, arguing the step would ease dependence on Turkey and boost trade with the south.
Evren Baglarbasi, vice president of the Turkish Cypriot Chamber of Commerce, says her members could benefit from possible price hikes in the south as merchants round prices up in converting to the new currency, a phenomenon that has irritated consumers in other countries joining the euro.
"Sales could increase because of a price advantage," she said.
In 2006, an estimated 110 million Cyprus pounds (US$271 million; euro188 million) made their way northward _ 50 million (US$123 million; euro85 million) more than what flowed south.
Turkish Cypriot shoppers are lured by the greater choice available on the Greek side, which has led Turkish Cypriot authorities to impose an unpopular euro135 (US$194) cap on spending across the border.
"It appears the government here is trying to implement a protectionist policy option," said Erol Kaymak, an assistant professor of international relations at the Eastern Mediterranean University, based in northern Cyprus. "At first the government appealed for Turkish Cypriot economic nationalism, but nobody was falling for that."
Erel claimed the policy also was aimed at maintaining the separation between Greek and Turkish Cypriots. "In the long run, authorities in the north are under the control of Turkey, which isn't ready for improved relations between the two communities before EU-Turkey relations improve," he said.
In October, the outgoing Cyprus pound was fixed at euro0.585, while euro1 buys about 1.7 new Turkish lira.