Bailed-out Cyprus should reunite in order to boost its struggling economy, EU economic affairs commissioner Olli Rehn said on Wednesday (8 May).

"It is worth recalling that the reunification of the island would give a major boost to the economic and social development of Cyprus," the commissioner told MEPs during a hearing on the shaping and effects of the island's recently-agreed €10 billion bailout.

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Recalling his previous life as commissioner for enlargement where he "worked hard to facilitate the reunification of Cyprus," Rehn said: "I regret that there has been no decisive progress."

He added it was "high time to revitalise the process."

He is the most senior EU official to publicly make the connection between the crisis and reunification.

It follows a statement last month by Daniel Cohn-Bendit, head of the Greens in the European Parliament, scolding Cyprus' creditors for not insisting that Cyprus reunites.

Cyprus has been divided since 1974, when Turkey invaded the island in response to a coup by those supporting union with Greece.

Ankara still maintains over 30,000 troops in the northern part. Meanwhile, the Cyprus question is key to Turkey's stalled EU membership bid.

"Turkish investors will only invest in Cyprus when there's a reunification," said Cohn-Bendit.

"The business model must come through reunification. A reunification within the European Union," he added.

Michael Moller, a former UN special representative for Cyprus, writing recently in the New York Times pointed out that a clutch of reasons mean that the time is ripe for "imaginative solutions."

These include Cyprus' own dire economic outlook (its economy is predicted to contract by a huge 13 percent over the next two years), Greece's friendlier relations with Turkey, and Turkey's growing economic and political influence in the region.

But the issue remains highly sensitive to Greek Cypriots, who in 2004, contrary to Turkish-Cypriots, rejected a UN plan for reunification they considered unjust.

Cyprus then joined the European Union creating an anomaly where only the southern part enjoys the benefits of EU membership.

Fiona Mullen, an analyst with Nicosia-based Sapienta Economics, said Greek-Cypriots are wary of being forced into reunification.

"The dominant discourse in mainstream media is: 'we don't want to be blackmailed into accepting a solution that we find to be unacceptable',” she said.

“Any solution would have to show a very clear path out of the economic crisis,” she noted

She added that the large gas fields off Cyprus may have changed the parameters of the discussion, with Turkey also hungry for energy sources.

“If people can see it as a win-win situation, it would be a positive start to try and relaunch (reunification) negotiations, which have been moribund for over a year now,” Mullen said.

At the moment, Greek Cypriots do not do any trade with Turkey, the biggest market in the region.

Estimates in 2008 by Mullen and her colleagues found that if the Cyprus problem was resolved - and trade opened up between all of Cyprus and Turkey - it could initially be worth about €5,500 per Cypriot family each year.