Eclipsed by the state of tumult in the region, a quiet miracle has occurred in the eastern Mediterranean, where Cyprus has come back from the brink of economic disaster in a recovery that would be the envy of its cousins in Greece.

As the race to reunite the divided island begins in earnest on Friday, in a meeting between the leaders of its Turkish and Greek communities, there is mounting evidence that the EU’s most easterly state could be heading for a new era. “The moment of truth has arrived,” says Hubert Faustmann, an associate professor of history and political science at the University of Nicosia. “The coming weeks will be decisive.”

At no time since conflict split the island in 1974 has a confluence of events pointed as much in the direction of peace. In Nicos Anastasiades and Mustafa Akıncı, the two men now leading the Greek and Turkish communities, Cyprus has politicians determined to end its ethnic partition. More than ever, they say, the island nation is too small to remain fractured by the legacy of hate. But it is the remarkable economic recovery of Greeks in the south – barely two years after the collapse of its banks briefly put the country at the centre of Europe’s financial crisis – and a growing recognition of the benefits of reunification which has fuelled enthusiasm that a settlement can finally be reached.

A Turkish woman and a child flee the fighting between Greeks and Turks in Cyprus in August 1974. Photograph: Reg Lancaster/Getty Images

When Anastasiades and Akıncı meet in an abandoned, bullet-pocked airport terminal that, like the UN buffer zone which cuts through the island, has become the most potent symbol of its division, there is rare and genuine belief that both will be treading on a path leading to the formation of a federal state. “For the first time, there is a feeling that this time it could be real,” says Faustmann. “In the next six to eight weeks, over the course of the leaders’ meetings, we will know if the dynamics for a settlement can be maintained.”

All agree that the challenges remain immense. Talks over territorial readjustments and the ever-explosive issue of property restitution could yet throw a wrench in the progress. Sunday’s general election in Turkey, six months after polls resulted in a hung parliament, could also lead to a setback. But on the ground, what is sure is that 12 years after free travel was allowed – with the lifting of barriers by the Turkish-run republic in the north – there is a growing, some would say irreversible, hunger for coexistence.



This week, a ceremony in the heart of old Nicosia gave voice to that desire. In bright sunshine, Greek and Turkish Cypriots piled into an airy cafe established with the express purpose of encouraging entrepreneurial contact across the ethnic divide. There, one after another, they extolled the riches of reunification as the easyJet founder and self-described serial entrepreneur, Sir Stelios Haji-Ioannou, handed out his annual bicommunal business awards – 31 cash prizes of €10,000 (£7,200). “We are super-optimistic,” says Tania Matsuka, who recently joined Nazo Canitez, a Turkish Cypriot, to set up Climb Mediterranean, a company dedicated to rock climbing and yoga on the beach. “Division belongs to the past. There is a border in our land but in our minds we have let go of it,” she adds.

The two women might never have met had it not been for a chance encounter during a climbing expedition on the Greek island of Kalymnos. “This award has given us the injection, motivation and acceleration to base our company here in Cyprus,” says Canitez, who had crossed the island’s UN-patrolled ceasefire line to attend the ceremony in the internationally recognised south.

“Rock climbing is an activity of trust. Even if there is no solution, we will try to bring people closer together here through it,” she adds.

Greek Cypriot Michalis Michael and his Turkish Cypriot wife, Sukran Ozerdem, at Stelios Haji-Ioannou’s bicommunal business awards. Photograph: Petros Karadjias/AP

Haji-Ioannou was astounded when applications for the award – established to promote common business endeavours – were four times higher than in previous years.

“We have to change hearts and minds” Haji-Ioannou, whose father was a Greek Cypriot ship owner, tells the Guardian. “Cyprus is the fault-line between Christianity and Islam. I really believe that you need to build links between people first to get to a solution.”

The British businessman jokes that 25 years ago, when memories of the Turkish invasion were all too fresh, he “would probably” have been assassinated for establishing such a prize. But this year, the awards were handed out in the presence of Anastasiades, with Haji-Ioannou meeting Akıncı in the north the following day.

Increasingly, both sides agree that financial and creative coexistence is the best way forward for an island whose geostrategic location could make it a regional energy hub in years to come.

In the hushed halls of Nicosia’s finance ministry, Greek Cypriot officials are jubilant that the island’s economy – branded a lost cause when it was rescued to the tune of €10bn two years ago – is now being hailed a success story on a par with Ireland and Spain. In their latest report on the bailed-out state’s financial progress, creditors at the EU, European Central Bank and International Monetary Fund said Cyprus was well on course to exit its bailout programme by March, leaving only perpetually problem-plagued Greece in the EU under external stewardship. “Economic recovery has started,” the lenders wrote. “Budget developments remain above expectations.”

On Tuesday, for the first time since the economic crisis erupted, Cyprus successfully issued 10-year bonds. The issue drew €1bn at a yield of 4.5%, the lowest rate secured by the republic on 10-year bonds. “Confidence has returned to the Cyprus economy,” says George Sklavos, a finance ministry official, smiling broadly as he lists the centre-right government’s fiscal achievements. “We had a very good relationship with the troika [of creditors] and that helped us with implementation.”

Cypriots, more phlegmatic than volatile mainland Greeks, also put up less of a fight. “Many people here felt that the changes were necessary, that the reforms should have happened a long time ago,” Sklavos says.

Instead of increasing taxes – the focus of the latest bailout deal to prop up the Greek economy – the Anastasiades administration targeted public expenditure, freezing hirings in the state sector and taking an axe to welfare spending.

But while the south has also erased its deficit, local officials readily concede that the nation’s economy will soar only if reunification takes place. A recent study by the Cyprus Centre of the Peace Research Institute Oslo (PRIO), forecasts huge gains for the island financially, with GDP increasing by just under €5bn in the first five years after a peace deal and by €10bn within 20 years. In terms of GDP per capita, Cypriots would see their income increase by about €1,700 in the first five years alone. “Reunification would open up a huge dynamic market in the form of Turkey,” says Sklavos. “Right now, we have no access to it.”

The prospect of such economic gains may well make for compromise, the much-needed glue upon which any solution will be sealed. Greek Cypriots, who lost more than a third of the island when an ill-fated attempt at “enosis” – or union – with Greece triggered an invasion by the Turkish army, will almost certainly have to give way on key demands. Turks, too, will have to concede territory seized at the time.

Informed public debate will be pivotal to agreement being achieved. Any solution will be put to referendum in both communities. The last time Cyprus came close to a settlement in 2004, the UN-brokered blueprint outlining a bizonal, bicommunal federation was accepted by Turkish Cypriots but wholeheartedly rejected by their Greek counterparts after a fierce no campaign lead by Tassos Papadopoulos, Cyprus’s then president. Ostracised by lack of recognition, Turkish Cypriots were then left out in the cold, unable to participate in EU membership.

“Experience has shown that the essence of a solution is as equally important as the way it is communicated,” says Harry Tzimitras, who heads PRIO’s Cyprus Centre. “In 2004, leaders in both communities presented their respected audiences with very specific readings of what was negotiated. There is a crucial need for informed public debate.”

But in politics, timing is everything. And the time might just be right, analysts say.

Turkey’s increasingly authoritarian president, Recep Tayyip Erdoğan, may hold the key to reunification. Photograph: Umit Bektas/Reuters

“A settlement would remove a major obstacle to Turkey’s European vocation, improve its ties with the west, further relations between Greece and Turkey and help Erdoğan score points domestically,” says Tzimitras.

Ironically, a big victory for Ankara’s increasingly authoritarian president, Recep Tayyip Erdoğan, may serve Cyprus well. Although about 35,000 Turkish troops continue to be stationed on the island – in reflection of the belief that the invasion of Cyprus was Turkey’s greatest military victory since the sacking of Smyrna in 1922 – Erdoğan has repeatedly spoken of the need for a solution, expressing frustration over Turkish Cypriots’ secular ways and the cost of bankrolling their mini-state.

“The irony is that a strong Erdoğan, an authoritarian Erdoğan, is good for a solution of the Cyprus problem,” says Faustmann. “It will then boil down to him and him alone as to whether there is a settlement or not.”