By now all of us know about that Mediterranean island called Cyprus, forced to declare bankruptcy by its European brethren. Its Finance Minister, Michalis Sarris and President Nicos Anastasiades flew all over Europe including Russia for the best deal they could find to save their financial sector. That sector was built partially over the years on laundering ill-gotten gains by Russian expats.
Both Sarris and Anastasiades failed and Europe dictated the terms of a bankruptcy that violates basic property rights and forces savers to bear the brunt of ill placed investments by Cypriot banks.
Yet sadly, all of this could have been avoided had Europe reached out of its comfort zone and forced Sarris and Anastasiades to take another trip, this time to Ankara.
Cyprus is not just a bankrupt country it is also a divided one. In 1974, post a coup and a Turkish military invasion, the island has been divided between an ethnic Turkish north and a Greek Cypriot south. Efforts at reconciliation between the two halves have faltered. This crisis was the perfect opportunity for the peace process to take center stage with Turkey as a real partner for Europe in a time of need.
Turkey has made similar gestures with Greece as it went through its financial upheaval and the two former foes have reshaped their relationship. The same opportunity is still available in Cyprus — Turkish capital in return for normalization and rapprochement between divided halves of the tiny Island.
A rapprochement with Turkey is clearly delicate and underlies deeper structural flaws within the European Union. For decades Turkey petitioned Brussels for economic and political inclusion. Each overture was declined as Europeans decried Turkey’s Muslim culture and weak economy. For years Europeans worried over an influx of Turkish workers taking European jobs. Post the crisis the tables have turned. The Turkish economy has flourished whilst Europe’s (ex-Germany) has stalled. The European project faces crisis after crisis and a lost generation of unemployed European youths are leaving their countries en-masse for any form of opportunity.
Instead of addressing the structural headwinds that now seriously hamper European economic growth, Brussels is in crisis management mode. Thus far their response has been deleterious; rather than following the U.S. example of fiscal and monetary easing, the Europeans have opted for austerity. Europe can not grow economically, thru austere policies and, equally important, it needs new markets and jobs to ease the economic burdens from which it now suffers. Turkish inclusion into the European project is an easy step towards that end, which could also bring added benefits of addressing age old rivalries in Cyprus. Sadly, Xenophobia is now strongest in the place where the term was first coined, unfortunately to its detriment and that of the European project it purportedly inspired.
Sourna Daneshvar is a former US Marine Officer and London based Investment Banker who currently resides in Chicago. He can be reached at firstname.lastname@example.org. Marvin Zonis is Professor Emeritus at Booth School of Business at The University of Chicago. Marvin.Zonis@ChicagoBooth.edu