Veto EU-lid Cyprus verhindert 259 mln euro hulp aan Turks-Cyprus (en)

EUOBSERVER / BRUSSELS - If member states do not reach a deal on releasing a €259 million EU aid package for Northern Cyprus before the end of the year, half of the cash will be lost - but Turkish Cypriots have threatened to decline the aid altogether.

Diplomats indicated that the UK presidency will present a proposal to member states' ambassadors on Thursday (8 December) to release the financial assistance package to the poor Turkish-populated north of the island, proposed by the European Commission in July 2004.

The money has been stuck in Brussels' coffers ever since, because the (Greek Cypriot) Republic of Cyprus, an EU member state since May 2004, has blocked the release of the funds.

Cyprus objects to the coupling of the aid to a commission-proposed "direct trade" scheme between the Turkish Cypriots and the EU, which Cypriot diplomats say would mean a de facto recognition of the Turkish occupation of the North.

But if member states do not agree to release the cash before the end of this year, half of the €259 million sum will be lost for fiscal reasons, with 2006 being a new budgetary year.

The UK presidency will now propose member states de-couple the aid package from the direct trade plan, enabling the cash to be released separately, with several sources indicating the matter was "urgent".

Direct trade off the table?

At Thursday's ambassadors meeting, the European Commission will present a declaration in which it will back the de-coupling, a European diplomat said.

But the content of the commission declaration will be highly sensitive, as Brussels will also express its view over the future of the trade package, which Turkish Cypriots and analysts say is economically much more important.

The diplomat said Nicosia has, in direct talks with the commission, been pushing for concrete reassurances that the direct trade scheme is now off the agenda.

But a commission source said that in the commission's view "the trade regulation remains on the table."

Turkish Cypriots may reject the deal

Moreover, the president of the Turkish Cypriot Chamber of Commerce Erdil Nami told EUobserver after meeting commission officials that there is a "big possibility" that Turkish Cypriots will say "no" to the money altogether, if it means giving up on direct trade.

Mr Nami, who was to meet with the British and French ambassadors later today, said the €259 million EU aid package was important primarily in terms of "the direct contacts with EU authorities that this will bring", but economically less so.

He added that by contrast, direct trade would boost Turkish Cypriot exports as it entailed preferential tariffs for products to be exported to EU countries.

"We are EU citizens and part of the European Union", said Mr Nami, reminding EU countries of their obligations to end the isolation of the Turkish Cypriots.

The north of the island has been under international trade embargo since Turkish forces occupied the territory in 1974, after a coup d'etat on the island by Greek army officers.