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Cyprus Progress Report 1998

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Cyprus Progress Report 1998 REGULAR REPORT FROM THE COMMISSION ON CYPRUS’ PROGRESS TOWARDS ACCESSION *********************** 1 Table of contents INTRODUCTION a) Context of the report b) Methodology c) Bilateral relations between the EU and Cyprus c.1 The Association Agreement c.2 Financial cooperation c.3 A specific EU pre-accession strategy 1. RECENT POLITICAL DEVELOPMENTS 1.1 Institutions in Cyprus Political pluralism and election process Institutions of Government Judicial system Human rights and respect for and protection of minorities The situation in the northern part of the island 1.2 Attempts to settle the Cyprus question Review of the problem The development of the conflict since the Turkish occupation of August 1974 1.3 The basis for a settlement 2. ECONOMIC ISSUES 2.1. Introduction 2.2. Economic Developments since the Commission opinion Macroeconomic developments Structural issues 2.3. General Evaluation 3. PROGRESS IN ADOPTING THE ACQUIS 3.1 Internal Market without frontiers The Four Freedoms General Framework Free Movement of Goods Free Movement of Capital Free Movement of Services Free Movement of Persons Competition 3.2 Customs 3.3 Taxation 2 3.4 Employment, Working conditions and Social Affairs 3.5 Economic and Monetary Union 3.6 Regional Policies and cohesion 3.7 Industry including SMEs 3.8 Agriculture and Fisheries 3.9 Energy 3.10 Environment 3.11 Telecommunications 3.12 Audiovisual 3.13 Transport 3.14 Education, Training and Youth 3.15 Science and Research 3.16 Consumer Policy 3.17 Statistics 3.18 Financial Control 3.19 Cooperation in the fields of Justice and Home Affairs 3.20 General Evaluation 4. CONCLUSION ANNEXES Statistical Data 3 INTRODUCTION a) Context of the report The conclusions of the European Council in Cardiff stated that “The European Council welcomes the Commission’s confirmation that it will submit at the end of 1998 its first regular reports on each candidate’s progress towards accession…” The present report is a response to the European Council request. The Commission submitted an opinion on Cyprus to the Council in July 1993. It stated that, “in regard to economic aspects, the adoption of the acquis communautaire would pose no insurmountable problems”. The opinion also stated "there would be a greater chance of narrowing the development gap between north and south in the event of Cyprus’s integration with the Community.” The European Council repeatedly stated, notably at Dublin in December 1996, that negotiations on the accession of Cyprus would begin six months after the conclusion of the Inter-Governmental Conference (IGC) which resulted in the signing of the Treaty of Amsterdam on 2 October 1997. In Agenda 2000, in 1997, the Commission stressed that while Cyprus would surely not encounter major problems in embracing the acquis communautaire, it would have to improve the alignment of its financial rules and practices with those of the European Union (EU), and ensure that cooperation and supervision in all areas of justice and home affairs were stepped up. It was also noted that the Commission’s 1993 observations as to the economic stagnation in the northern part of the island remained valid, despite substantial financial transfers from Turkey, and in contrast to the remarkable economic development of the southern part. Agenda 2000 further noted that despite efforts by the United Nations (UN) to settle the Cyprus question, no progress had been made since its 1993 opinion. It reiterated that “the Union is determined to play a positive role in bringing about a just and lasting settlement in accordance with the relevant United Nations Resolutions. The status quo which is at odds with international law, threatens the stability of the island, the region and has implications for security.” The Luxembourg European Council in December 1997 took the decisions necessary to set the enlargement process in motion. It “decided to convene bilateral intergovernmental conferences in the spring of 1998 to begin negotiations with Cyprus, Hungary, Poland, Estonia, the Czech Republic and Slovenia on the conditions for their entry into the Union and the ensuing Treaty adjustments.” In addition, the Luxembourg European Council stated that “the accession of Cyprus should benefit all communities and help to bring about civil peace and reconciliation. The accession negotiations will contribute positively to the search for a political solution to the Cyprus problem through the talks under the aegis of the United Nations 4 which must continue with a view to creating a bi-communal, bi-zonal federation. In this context, the European Council requested that the willingness of the Government of Cyprus to include representatives of the Turkish Cypriot community in the accession negotiating delegation be acted upon”. On 12 March 1998, Cyprus attended the first meeting of the European Conference in London. On that occasion the President of the Republic of Cyprus Clerides tabled a proposal inviting Turkish Cypriot representatives to participate in the accession negotiations. The Turkish Cypriot leadership has so far not taken up this offer, which remains on the table. At the ministerial meeting to open accession negotiations with Cyprus on 31 March 1998, the EU Presidency stressed that the accession of Cyprus to the EU should benefit all communities, including the Turkish Cypriot community, and contribute to peace and reconciliation on the island. Following this opening Conference on accession negotiations, the analytical examination (“screening”) of the acquis started with Cyprus on 27 April 1998. Of the 31 chapters, 16 have already been screened. The Cypriot Government has presented its negotiating positions for 7 chapters (related respectively to Industrial Policy - chapter 15-, Small and Medium-Sized Enterprises -chapter 16-, Science and Research -chapter 17-, Education and Training -chapter 18-, Telecom and Information technologies -chapter 19-, Culture and Audiovisual Policy -chapter 20-, Common Foreign and Security Policy -chapter 27-) which have been transmitted to the Council. The General Affairs Council on 5 October 1998 in Luxembourg took “note of the position papers presented by the six candidate States concerned. It also noted the input provided by the Commission to assist the Union in defining a common position respectively in each bilateral Conference on Accession.” “The Council requested the convening of meetings of the Conferences on Accession at Ministerial level on 10 November 1998 and at the level of Deputies prior to that meeting in order to have substantive negotiations with Cyprus, Hungary, Poland, Estonia, the Czech Republic and Slovenia…” b) Methodology In drafting this report, the Commission drew on information regarding conditions in Cyprus supplied by missions on the spot and by the authorities of the Republic of Cyprus, with whom it maintains close contacts. The sections on the acquis incorporate the results of the screening exercise conducted since 27 April 1998 and the report submitted by the Government of the Republic of Cyprus in September 1998. The bar on contacts with Commission representatives imposed by the Turkish Cypriot authorities prevented it from obtaining information on the northern part of the island. Relevant information was provided by the Government of the Republic of Cyprus and international sources such as the United Nations Forces in Cyprus (UNFICYP). This data would need to be reviewed at a later date. c) Bilateral relations between the EU and Cyprus 5 c.1 The Association Agreement Cyprus and the European Community have been linked since 1973 by an Association Agreement which provided for the establishment of a customs union in two stages and within a period of ten years. After successive extensions of the first stage, a Protocol concerning the second stage of the Agreement was signed in Luxembourg on 19 October 1987. In accordance with the provisions of this Protocol, the final phase for the completion of the customs union, likewise in two phases, entered into force on 1 January 1988. The first phase provides for i) the reduction by Cyprus of customs duties and quantitative restrictions on industrial products (with a few exceptions) and on the 43 agricultural products covered by the agreement; ii) the adoption of the Common Customs Tariff (CCT) by Cyprus; iii) the harmonisation of accompanying policies: competition, state aids, approximation of laws. It has been implemented satisfactorily and, as from 1.1.1998, Cyprus has (a) abolished all customs duties on manufactured products originating in the Community and referred to in the Protocol, (b) abolished all quantitative restrictions and (c) fully aligned its customs tariff to the CCT in respect of manufactured products originating in third countries. The second phase provides for the free and unrestricted movement of industrial and agricultural products and the adoption of the accompanying policies required for the completion of the customs union. No major problems are expected in completing the customs union in 2002 as agreed1. The institutions established by the Association Agreement, notably the Association Council, are functioning smoothly. In the context of Cyprus’ preparation for membership, they have been complemented by the structured dialogue and subsequently by the accession negotiations process. c.2 Financial cooperation Cyprus has received a total of ECU 136 million (including EIB loans and risk capital) under three successive financial protocols extending from 1977 to 1994. All of it has been committed, except for that part set
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