The Greek debt crisis saga continues with no resolution in sight. As expected, the European leaders rejected a last-minute proposal by Alexis Tsipras, Prime Minister of Greece, requesting an extension of the bailout program that expired on 30th June and seeking a new €29.1 billion bailout package that could have covered country’s debt obligations over the next two years.
The rejection led the country to default on its €1.6 billion loan repayment to the International Monetary Fund. Greece is the first developed country to default to the IMF. Even though the IMF does not use the term default, it will now classify Greece as being “in arrears” and the country will only receive funds in future once the arrears are cleared.
After several rounds of protracted negotiations in Brussels, Greece had rejected the anti-austerity conditions contained in the bailout package prepared by the troika (European Commission, European Central Bank and the IMF). The troika demanded substantial cuts in pension and wages besides overhauling value-added tax as a precondition for releasing the remaining funds from the bailout package which expired on 30th June. Disappointed over the rigid stand taken by troika, on 27th June, Mr. Tsipras announced a referendum to decide whether or not Greece should accept the bailout conditions. The referendum will take place on 5th July.
By announcing a referendum, the Greek government has put the ball in people’s court. It is hard to predict the outcome of forthcoming referendum. It is likely that a No vote would strengthen the bargaining power of the current government which came to power on anti-austerity platform in January 2015. While a Yes vote would make the government’s position untenable and probably lead to general elections.
On 28th June, the Greek government imposed capital controls and other regulatory measures to maintain liquidity and stability in the banking system. These include:
- All banks in the country will remain closed for a week (June 29- July 6, 2015).
- An individual can withdraw up to €60 per card a day from ATM.
- The foreign bank cards are exempted from this daily limit.
- The transfer of money to outside Greece will require approval from the official authorities.
- A specialized agency will deal with urgent payments that cannot be met through cash withdrawals or electronic transactions.
The Accumulation of Public Debt
No discussion on Greek debt crisis would be complete without analyzing how the country’s public debt got accumulated over the years. In 2004, the country’s public debt was €183.2 billion. By 2009, it reached as high as €299.5 billion, or 127 percent of country’s GDP.
Currently, Greece’s public debt stands at €323 billion, nearly 175 percent of country’s gross domestic product. Both the critics and supporters of Greek’s government admit that such a high debt-GDP ratio is unsustainable. The current government is seeking substantial write-off of country’s debt so as to put the country back on a growth trajectory. While seeking debt relief for Greece, several economists and legal experts have referred to London Agreement in 1953 which gave generous debt relief to West Germany by writing off its 50 percent of debt, accumulated after world wars. This debt relief was one of the key factors which enabled the reemergence of Germany as a world economic power in the post-war period.
In 2015, the Greek Parliament set up a Truth Committee about the Public Debt to investigate how country’s foreign debt got accumulated from 1980 to 2014. The Committee has recently released a preliminary report which states that Greek public debt is largely illegitimate and odious. I would earnestly request readers to read this report as it confronts several popular myths associated with the Greek public debt. According to the report, the increase in debt before 2010 was not due to excessive public spending but rather due to the payment of extremely high rates of interest to creditors and loss of tax revenues due to illicit capital outflows. Excessive military spending also took place before 2010.
More importantly, the report reveals how the first loan agreement of 2010 was used to rescue the Greek and other European (especially German and French) private banks. The loan agreements of 2010 (and 2012) helped private banks and creditors to offload their risky bonds issued by the Greek government. In simple words, the debt of the private banks was transformed into public sector debt via bail-outs. As pointed out by Tim Jones of Jubilee Debt Campaign, it is not the people of Greece who have benefitted from bailout loans from the troika but the European and Greek banks which recklessly lent money to the Greek government in the first place.
Out of €254 billion lent to the Greek government by troika since 2010, only 11 percent have been spent to meet government’s current expenditure. Of course, previous governments of Greece are equally responsible for spending beyond its means and falsifying its public accounts.
Who owns Greece’s public debt? Currently, close to 80 percent of Greece’s public debt is owned by public institutions — primarily from the EU (member-states, ECB and EFSF) and the IMF (see chart below) The rest is owned by private creditors.
Austerity Caused a Humanitarian Crisis
The social and economic consequences of austerity measures imposed by troika on Greece have been devastating. Since 2010, Greece’s GDP has fallen by 25 percent and unemployment rate is 26 percent. The youth unemployment rates are at an alarmingly high level. Currently, over 56 percent of young people in Greece are without a job and there are more than 450,000 families with no working members. After five years of fiscal adjustment and economic hardship under the austerity program, Greece’s major indicators (including GDP, employment and incomes levels) are still far below the pre-crisis levels.
The welfare spending cuts proved to be counter-productive. As pointed out by Ozlem Onaran of University of Greenwich: “The wage and pension cuts and fiscal consolidation led to lower GDP, tax losses, and higher public debt. Our estimates show that the fall in the wage share alone has led to a loss in GDP by 4.5%, and a 7.80% point increase in the public debt/GDP ratio. The fall in wages alone explains more than a quarter (27%) of the rise in the public debt/GDP ratio in this period. The conditionalities of the memoranda have not only been counterproductive in terms of its aims regarding debt sustainability, but also engineered a humanitarian crisis.”
Many legal experts argue that the harsh austerity program imposed by troika could potentially pose a violation of human rights. According to Ilias Bantekas, Professor of International Law at Brunel University Law School, “The measures imposed against the Greek people were wholly antithetical to fundamental human rights as these stem from customary international law, multilateral treaties and the Greek constitution. Consequently, these ‘loans’ were held to be odious, illegal or illegitimate.”
It is pertinent to note that not just in Greece, the austerity programs also failed to yield positive results in Cyprus, Spain and Ireland.
Grexit: Pain and Gain
What would happen if Greece abandons or is forced to exit the euro? In the short-term, it would certainly entail greater uncertainty and economic hardship. A massive capital flight by the elites along with collapse of banks and businesses which have borrowed in euros cannot be ruled out. The payments of salaries and pensions could also be delayed for months.
The social and economic consequences could be disastrous for Greek economy and its people if the transition from the euro to a new national currency (possibly drachma – its old currency) is badly managed. Hence, the transition should be well-planned and properly implemented with popular support.
There is a growing consensus that a massive devaluation of drachma would help in increasing domestic demand and improving the prospects of economic recovery. A weak drachma would make Greek exports more competitive and its tourism more attractive and therefore would open up new opportunities to enhance exports and encourage more tourism over the long-term. Exports account for nearly 30 percent of its GDP. Because of a weak new drachma, the demand for domestic goods would increase as imports will become more expensive thereby boosting the domestic demand which, in turn, would also encourage greater domestic production and create more jobs for Greek people.
In addition, Greece will also regain its independent monetary policy and fiscal space to set policies in tune with its own economic needs instead of those of Eurozone economies. Needless to say, a small country like Greece (representing less than 2 percent of EU’s GDP) should never have joined the flawed monetary union in the first place.
Wider Ramifications for Europe
Greece leaving the euro will have serious economic ramifications for the rest of Europe. If Greece leaves the Eurozone, the threat of financial contagion to other weak Eurozone economies (such as Portugal, Ireland, Spain and Italy) looms large and subsequently these economies may as well exit the euro. Not only such a move would weaken the Eurozone but, more importantly, it would spell the end of the single currency experiment and the larger European project towards greater economic integration.
Besides, one cannot ignore the fact that the euro may face massive devaluation if international investors liquidates their European assets and investments en masse.
Furthermore, there are human and geo-political ramifications which are not sufficiently understood by European leaders. How will the EU cope with the influx of migrants from North Africa who enter Europe (via Mediterranean route) without the active cooperation of Greek government?
Technically speaking, an exit from euro does not mean an exit from the EU. A Greek veto on extending sanctions against Russia over Ukraine would further weaken the European strategy to isolate Russia.
The observation made by many commentators that Grexit would isolate the country from the world economy is highly misplaced. Greece can explore new economic partnerships and build strategic alliances with Russia, China and other developing world. Given its favourable geo-economic location in Southern Europe, Greece can emerge as an important regional energy distribution hub. Greece has already launched discussions with Russia to build a gas pipeline to Greece via Turkey and then to Europe. This pipeline could bring immense benefits to Greece’s economy in terms of new investments and jobs. Greece is currently considering joining the New Development Bank (NDB) which was set up in 2014 by BRICS. Becoming a member of Asian Infrastructure Investment Bank is another possibility.
Needless to say, the European leaders need to act more like statesmen as the European Union is founded on the values of respect for democracy, equality, human rights and solidarity.
The Broader Meanings of ‘No’ Vote
Finally, the Greek citizens have delivered a resounding ‘No’ to bailout conditions demanded by creditors in a referendum held on 5th July. The referendum was announced by Greece’s Prime Minister, Alexis Tsipras, on 27th June after bailout talks with the creditors failed. The referendum asked voters to decide “whether to accept the outline of the agreement submitted by the European Union, the European Central Bank and the International Monetary Fund at the Eurogroup of 25/06/15.”
The government-backed ‘No’ side won with 61.31 percent of votes, while ‘Yes’ got the remaining 38.69 percent. Further, not a single electoral district of Greece voted for ‘Yes’. No one in Greece had predicted such a massive victory for ‘No’ vote. Most opinion polls had predicted a tight contest with ‘No’ side winning by a slim margin.
Does a ‘No’ victory mean Greece leaving the euro and the EU? Not exactly. As pointed out by PM Tsipras, “This is not a mandate of rupture with Europe, but a mandate that bolsters our negotiating strength to achieve a viable deal.”
Undoubtedly, the landslide victory in the referendum has greatly strengthened the bargaining power of the current government with creditors. The impacts of the austerity measures imposed by the international creditors have been catastrophic. The Syriza-led government, which came into power on an anti-austerity platform in January 2015, has resisted pressure to implement harsh austerity programs that affect the elderly and the poor.
Another positive outcome of the referendum is that the opposition parties have also given support to the Syriza-led government to negotiate a new deal with creditors. In many important ways, the decisive referendum has brought political stability in Greece which has witnessed four elections in five years.
A New Deal for Greece
In the current circumstances, a new deal is challenging but still feasible. Both sides need to realize the sense of urgency to pursue a realistic agenda. The negotiations between Athens and Brussels should resume immediately in order to avoid a major financial meltdown.
On their part, the leaders of Eurozone should accept a compromised deal to end the impasse. They should not insist that any special privileges to Greece would encourage other potential rule-breaking eurozone countries. The costs of a Grexit are high not only for Greece but also the entire Europe in terms of wider economic and geo-political implications.
It is important to note that the IMF in its preliminary draft debt sustainability analysis (dated June 26, 2015) has sought substantial debt reduction along with extended concessional financing for Greece. This IMF analysis specifically points out that Greece needs “a significant haircut of debt, for instance, full write-off of the stock outstanding in the GLF facility (€53.1 billion) or any other similar operation.” The Greek Loan Facility (GLF) consists of bilateral loans pooled by the European Commission.
A new deal is feasible if the European leaders realize the true importance of ‘No’ vote. The message of Greek referendum is loud and clear: harsh austerity measures imposed by the EU lack democratic legitimacy. And the debt relief should not be treated as a taboo.
Hence, keeping the wider interests of the European project in mind, its political leadership should adopt a more flexible approach towards Greece based on the principles of democracy, human rights, cooperation and solidarity. After all, the financial rules are meant to serve the people, not the other way around.
In return, Greece should also undertake policy measures to check massive tax evasion by oligarchs and streamline its public finances. Needless to say, the Greek government should be given a fair chance to put its house in order. This entails patience on the part of official creditors.
The 30th Anniversary of the Visegrád Group: The Voice of Central Europe
The Visegrád group or V4 is a cultural and political union created in 1991, during a conference in the city of Visegrád in Hungary. V4 has been a symbol of Central Europe’s international activity and a new way of coordinating regional cooperation. Czechia, Hungary, Poland, and Slovakia’s location in the Central European region provides shared cultural and intellectual roots, which they wish to, preserve and further strengthen.
The aim has been clear since the beginning of the cooperation: to eliminate the remnants of the Communist bloc in Central Europe and to accomplish the necessary transformation to further European integration. V4 accessed the EU membership together on May the 1st 2004. Once the goal – EU and NATO membership – had been reached, the Visegrád group did not disappear, as it was and still is also a way for those 4 countries to have a bigger voice by cumulating their strengths. However, some uneasiness and gloom can now be felt in this axis connecting the Baltic, the Adriatic, and the Black Sea.
Relationship with the EU
The construction of the Nord Stream 2 pipeline, which is being opposed by several central and eastern Europeans as well as the United States, is a contentious subject for the V4. Its completion would bypass the V4 region, causing economic and geopolitical harm. It’s not only about falling income from gas transit fees to Western Europe; it’s also about the overall “geopolitical rent” for the Central European area, which would dwindle correspondingly as the present gas pipelines’ relevance decreases.
In Brussels, “Europe” usually means Western Europe. Yet V4countries are, in terms of national progress, becoming the equals of, and even superior to, France and Germany—two EU founders and its two largest, wealthiest members. Recent statistical measures of economic growth, employment, and terrorism all show that four ex-Soviet satellites on the EU’s eastern frontier demonstrate better performance than France or Germany in almost every benchmark metric.
The gross domestic product (GDP) of the V4 grew an average of 4.3 percent in 2018, compared to 1.6 for France and Germany. In both Hungary and Poland, the growth of GDP was 5.1 percent, more than three times the average rate for France and Germany. The worst growth rate among the V4—Czechia’s 3.0 percent—was still double Germany’s growth rate. Given Germany’s stellar reputation as Europe’s economic powerhouse, this is significant. Yet inflation remained mild across all four Visegrád countries, ranging from 1.7 percent in Poland to 2.9 percent in Hungary.
Western Europe still sports larger economies, higher incomes, and longer life expectancies, but these represent a fading legacy of decades of prosperity and peace that was denied to the EU’s eastern members. The indicators, in which some CEE states still lag, like corruption or pollution, are similarly an inheritance of ex-communist rule. Pre-pandemic economic and social progress looked very good for Czechia, Hungary, Poland, and Slovakia, and troubling for Germany and France. If these trends resume—and there is no reason to think they won’t—the East will soon outshine the West.
Despite the fact that Germany is the largest net contributor of EU funds, its economy has benefited the most under the euro, gaining €1.9 trillion from 1999 and 2007, or about €23,000 per German. Berlin’s economy benefits from the EU’s euro zone in many ways, according to Bertelsmann Stiftung, a respected German think-tank. By 2025, the benefits could amount to €170 billion more for Germany. Observers often refer to the V4 as “two plus two,” because of their differing attitudes to European integration. Czechia and Slovakia are more Europe-friendly than Poland and Hungary, which are far more eurosceptic.
The V4 do not share the post-World War II view of the EU embraced by dominant decision-makers in Western Europe, such as France, and Germany. Hungary and Poland’s authorities have generated front-page headlines in recent months for disregarding EU regulations. Their vision for Europe is for a robust and strong nation-state. The V4 has emerged as a non-institutional organization but is increasingly present as a separate agent in European and global politics. The upcoming year, with all its challenges, will certainly reveal more about this partnership. Central Europe needs to be strong within the European Union, and this requires a functioning Visegrád, and the willingness to find common results.
EU: The stalemate in negotiations brings Serbia ever closer to Russia and China
Serbia has been waiting since 2012 for the European Union to respond to its application to become a full member of the EU.
In spite of exhausting negotiations, this response is slow in coming and the main cause of the stalemate has a clear name: Kosovo. Before accepting Serbia’s application for membership, the EU requires a definitive solution to the relations between Serbia and that region that broke away from it after the 1999 conflict – when NATO came to the aid of the Kosovo Albanians – and proclaimed its independence in February 2008.
Serbia has never recognised the birth of the Kosovo Republic, just as many other important countries have not: out of 193 UN members, only 110 have formally accepted the birth of the new republic, while the rest, including Russia, China, Spain, Greece and Romania – to name just the most important ones – refuse to recognise the independence of the Albanians of what was once a region of Serbia.
The European Union cannot accept that one of its members is in fact unable to guarantee control over its borders, as would be the case for Serbia if its membership were accepted.
In fact, since the end of the war between Kosovo and Serbia, there is no clear and controlled border between the two countries. In order to avoid continuous clashes, Kosovo and Serbia have actually left the border open, turning a blind eye to the ‘smuggling economy’ that thrives on both sides of the border.
In this situation, if Serbia were to become a full member of the European Union, it would create a gap in the borders of the entire Schengen area, as anyone passing through Kosovo could then move into all EU countries.This is not the only obstacle to Serbia’s accession to the European
Union: many European chancelleries are wary of Serbian foreign policy which, since the dissolution of the Yugoslav Federation, has maintained a privileged relationship with Russia, refusing to adhere to the sanctions decided by Europe against Russia after the annexation of Crimea to the detriment of Ukraine.
During the Covid-19 pandemic, Serbia even agreed to produce the Russian vaccine ‘Sputnik V’ directly in its own laboratories, blatantly snubbing EU’s vaccine offer.
For the United States and some important European countries, Serbia’s formal accession to the European Union could shift the centre of gravity of Europe’s geopolitics towards the East, opening a preferential channel for dialogue between Russia and the European Union through Serbia.
This possibility, however, is not viewed unfavourably by Germany which, in the intentions of the CDU President, Armin Laschet, the next candidate to succeed Angela Merkel as Chancellor, has recently declared he is in favour of a foreign policy that “develops in multiple directions”, warning his Western partners of the danger resulting from “the interruption of the dialogue with Russia and China”. In this regard, Laschet has publicly stated that ‘foreign policy must always focus on finding ways to interact, including cooperation with countries that have different social models from ours, such as Russia, China and the nations of the Arab world’.
Today we do not know whether in autumn Laschet will take over the leadership of the most powerful country in the European Union, but what is certain is that Serbia’s possible formal membership of the European Union could force Europe to revise some of its foreign policy stances, under the pressure of a new Serbian-German axis.
Currently, however, Serbia’s membership of the European Union still seems a long way off, precisely because of the stalemate in the Serbia-Kosovo negotiations.
In 2013 Kosovo and Serbia signed the so-called ‘Brussels Pact’, an agreement optimistically considered by European diplomats to be capable of rapidly normalising relations between Serbia and Kosovo, in view of mutual political and diplomatic recognition.
An integral part of the agreement was, on the one hand, the commitment of Kosovo’s authorities to recognise a high degree of administrative autonomy to the Kosovo municipalities inhabited by a Serb majority and, on the other hand, the collaboration of the Serbs in the search for the remains of the thousands of Kosovar Albanians presumably eliminated by Milosevic’s troops during the repression that preceded the 1999 war.
Neither of the two commitments has so far been fulfilled and, during the meeting held in Brussels on July 21 between Serbian President Alexander Vucic and Kosovo’s Prime Minister Albin Kurti, harsh words and reciprocal accusations were reportedly exchanged concerning the failure to implement the ‘Pact’, to the extent that the Head of European foreign policy, Josep Borrel, publicly asked the two parties to ‘close the chapter of a painful past through a legally binding agreement on the normalisation of mutual relations, with a view to building a European future for its citizens’. This future seems nebulous, to say the least, if we consider that Serbia, in fact, refuses to recognise the legal value of degrees and diplomas awarded by the Kosovo academic authorities also to members of the Kosovo Serb minority.
Currently, however, both contenders are securing support and alliances in Europe and overseas.
Serbia is viewed favourably by the current President of the European Union, Slovenian Janez Jansa, who is a supporter of its membership because “this would definitively mark the dissolution of the Yugoslav Federation”. The vast majority of European right-wing parties, ranging from the French ‘Rassemblement National’ to the Hungarian ‘Fydesz’, also approve of Serbia’s membership application and openly court the Serbian minorities living in their respective countries while, after the years of US disengagement from the Balkans under Presidents Bush, Obama and Trump, the Biden administration has decided to put the region back on the list of priority foreign policy commitments, entrusting the ‘Serbia dossier’ to the undersecretary for European and Eurasian Affairs, Matthew Palmer, an authoritative and experienced diplomat.
With a view to supporting its application for European membership, Serbia has also deployed official lobbyists.
Last June, Natasha Dragojilovic Ciric’s lobbying firm ND Consulting officially registered in the so-called EU ‘transparency register’ to promote support for Serbia’s membership. ND is financed by a group of international donors and is advised by Igor Bandovic, former researcher at the American Gallup and Head of the Belgrade Centre for Security Policy, by lawyer Katarina Golubovic of the ‘Committee of Human Rights Lawyers’ and Jovana Spremo, former OSCE consultant.
These are the legal experts deployed by Serbia in Brussels to support its application for formal European integration, but in the meantime Serbia is not neglecting its “eastern” alliances.
Earlier this month, the Head of the SVR, the Russian Foreign Intelligence Service, Sergey Naryshkin, paid an official visit to Belgrade, a few weeks after the conclusion of a joint military exercise between Russian special forces (the “Spetznaz”) and Serbian special forces.
In the Serbian capital, Naryshkin not only met his Serbian counterpart Bratislav Gasic, Head of the ‘Bezbednosno Informativna Agencija’, the small but powerful Serbian secret service, but was also received by the President of the Republic Alexander Vucic with the aim of publicising the closeness between Serbia and Russia.
The timing of the visit coincides with the resumption of talks in Brussels on Serbia’s accession to the European Union and can clearly be considered as instrumental in exerting subtle diplomatic pressure aimed at convincing the European Union of the possibility that, in the event of a refusal, Serbia may decide to definitely turn its back on the West and ally with an East that is evidently more willing to treat the Serbs with the dignity and attention that a proud and tenacious people believes it deserves.
A piece of news confirming that Serbia is ready to turn its back on the West, should Europe continue to postpone the decision on its accession to the European Union is the fact that China has recently signed a partnership agreement with Serbia in the field of pharmaceutical research, an agreement that makes Serbia one of China’s current largest commercial partners on the European continent.
NATO’s Cypriot Trick
When the Soviet Union collapsed and the Warsaw Pact died, there was much speculation that NATO would consider itself redundant and either disappear or at least transmogrify into a less aggressive body.
Failing that, Moscow at least felt assured that NATO would not include Germany, let alone expand eastwards. Even the NATO Review, NATO’s PR organ, wrote self-apologetically twenty-five years after the fall of the Berlin wall: “Thus, the debate about the enlargement of NATO evolved solely in the context of German reunification. In these negotiations Bonn and Washington managed to allay Soviet reservations about a reunited Germany remaining in NATO. This was achieved by generous financial aid, and by the ‘2+4 Treaty’ ruling out the stationing of foreign NATO forces on the territory of the former East Germany. However, it was also achieved through countless personal conversations in which Gorbachev and other Soviet leaders were assured that the West would not take advantage of the Soviet Union’s weakness and willingness to withdraw militarily from Central and Eastern Europe.”
Whatever the polemics about Russia’s claim that NATO broke its promises, the facts of what happened following the fall of the Berlin wall and the negotiations about German re-unification strongly demonstrate that Moscow felt cheated and that the NATO business and military machine, driven by a jingoistic Cold War Britain, a selfish U.S. military-industrial-congressional complex and an atavistic Russia-hating Poland, saw an opportunity to become a world policeman.
This helps to explain why, in contrast to Berlin, NATO decided to keep Nicosia as the world’s last divided city. For Cyprus is in fact NATO’s southernmost point, de facto. And to have resolved Cyprus’ problem by heeding UN resolutions and getting rid of all foreign forces and re-unifying the country would have meant that NATO would have ‘lost’ Cyprus: hardly helpful to the idea of making NATO the world policeman. Let us look a little more closely at the history behind this.
Following the Suez debacle in 1956, Britain had already moved its Middle East Headquarters from Aden to Cyprus, while the U.S. was taking over from the UK and France in the Middle East. Although, to some extent under U.S. pressure, Britain was forced to bring Makarios out of exile and begin negotiating with Greece and Turkey to give up its colony, the U.S. opted for a NATO solution. It would not do to have a truly sovereign Cyprus, but only one which accepted the existence of the Sovereign Base Areas (SBAs) as part and parcel of any settlement; and so it has remained, whatever the sophistic semantics about a bizonal settlement and a double-headed government. The set of twisted and oft-contradictory treaties that have bedevilled the island since 1960 are still afflicting the part-occupied island which has been a de facto NATO base since 1949. Let us look at some more history.
When Cyprus obtained its qualified independence in 1960, Greece and Turkey had already signed, on 11 February 1959, a so called ‘Gentlemen’s Agreement’, agreeing that they would support Cyprus’ entry into NATO.1 This was, however, mere posture diplomacy, since Britain—and the U.S. for that matter—did not trust Cyprus, given the strength of the Progressive Party of Working People (AKEL) and the latter’s links to Moscow. The Ministry of Defence (MOD) wrote: ‘Membership of NATO might make it easier for the Republic of Cyprus and possibly for the Greeks and Turks to cause political embarrassment should the United Kingdom wish to use the bases […] for national ends outside Cyprus […] The access of the Cypriot Government to NATO plans and documents would present a serious security risk, particularly in view of the strength of the Cypriot Communist Party. […] The Chiefs of Staff, therefore, feel most strongly that, from the military point of view, it would be a grave disadvantage to admit Cyprus to NATO.’2 In short, Cyprus was considered unreliable.
As is well known, the unworkable constitution (described as such by the Foreign Office and even by David Hannay, the Annan reunification plan’s PR man), resulted in chaos and civil strife: in January 1964, during the chaos caused by the Foreign Office’s help and encouragement to President Makarios to introduce a ‘thirteen point plan’ to solve Cyprus’ problems, British Prime Minister Douglas-Home told the Cabinet: ‘If the Turks invade or if we are seriously prevented from fulfilling our political role, we have made it quite clear that we will retire into base.’3 Put more simply, Britain had never had any intention of upholding the Treaty of Guarantee.
In July of the same year, the Foreign Office wrote: ‘The Americans have made it quite clear that there would be no question of using the 6th Fleet to prevent any possible Turkish invasion […] We have all along made it clear to the United Nations that we could not agree to UNFICYP’s being used for the purpose of repelling external intervention, and the standing orders to our troops outside UNFYCYP are to withdraw to the sovereign base areas immediately any such intervention takes place.’4
It was mainly thanks to Moscow and President Makarios that in 1964 a Turkish invasion and/or the island being divided between Greece and Turkey was prevented. Such a solution would have strengthened NATO, since Cyprus would no longer exist other than as a part of NATO members Greece and Turkey. Moscow had issued the following statement: ‘The Soviet Government hereby states that if there is an armed foreign invasion of Cypriot territory, the Soviet Union will help the Republic of Cyprus to defend its freedom and independence against foreign intervention.’5
Privately, Britain, realising the unworkability of the 1960 treaties, was embarrassed, and wished to relieve itself of the whole problem. The following gives us the backstage truth: ‘The bases and retained sites, and their usefulness to us, depend in large measure on Greek Cypriot co-operation and at least acquiescence. A ‘Guantanamo’6 position is out of the question. Their future therefore must depend on the extent to which we can retain Greek and/or Cypriot goodwill and counter USSR and UAR pressures. There seems little doubt, however, that in the long term, our sovereign rights in the SBA’s will be considered increasingly irksome by the Greek Cypriots and will be regarded as increasingly anachronistic by world public opinion.7
Following the Turkish invasion ten years later, Britain tried to give up its bases: ‘British strategic interests in Cyprus are now minimal. Cyprus has never figured in NATO strategy and our bases there have no direct NATO role. The strategic value of Cyprus to us has declined sharply since our virtual withdrawal from east of Suez. This will remain the case when the Suez Canal has reopened.8
A Cabinet paper concluded: ‘Our policy should continue to be one of complete withdrawal of our military presence on Cyprus as soon as feasible. […] In the circumstances I think that we should make the Americans aware of our growing difficulty in continuing to provide a military presence in Cyprus while sustaining our main contribution to NATO. […]9
Britain kept trying to give up the bases, but the enabler of the Turkish invasion, Henry Kissinger, did not allow Britain to give up its bases and listening posts, since that would have weakened NATO, and since Kissinger needed the bases because of the Arab-Israel dispute.10
Thus, by the end of 1980, in a private about-turn, Britain had completely succumbed to American pressure: ‘The benefits which we derive from the SBAs are of major significance and virtually irreplaceable. They are an essential contribution to the Anglo-American relationship. The Department have regularly considered with those concerned which circumstances in Cyprus are most conducive to our retaining unfettered use of our SBA facilities. On balance, the conclusion is that an early ‘solution’ might not help (since pressures against the SBAs might then build up), just as breakdown and return to strife would not, and that our interests are best served by continuing movement towards a solution – without the early prospect of arrival [author’s italics]11.
And so it is today: Cyprus is a de facto NATO territory. A truly independent, sovereign and united Cyprus is an anathema to the U.S. and Britain, since such a scenario would afford Russia the hypothetical opportunity to increase its influence in the Eastern Mediterranean.
From our partner RIAC
 Ministry of Defence paper JP (59) 163, I January 1960, BNA DEFE 13/99/MO/5/1/5, in Mallinson, William, Cyprus, a Modern History, I.B. Tauris (now Bloomsbury), London and New York, 2005, 2009, 2012, p.49.
 Memorandum by Prime Minister, 2 January 1964, BNA CAB/129/116, in ibid, Mallinson, William, p.37.
 British Embassy, Washington, to Foreign Office, 7 July 1964, telegram 8541, BNA FO 371/174766, file C1205/2/G, in ibid.’, Mallinson, William, p. 37.
 Joseph, Joseph S., Cyprus, Ethnic Conflict and International Politics, St Martin’s Press, London and New York, 1997, p. 66.
 In 1964, Cuba cut off supplies to the American base at Guantanamo Bay, since the US refused to return it to Cuba, as a result of which the US took measures to make it self-sufficient.
 Briefing paper, 18 June 1964, BNA-DO/220/170, file MED 193/105/2, part A. Mallinson,William, Kissinger and the Invasion of Cyprus, p. 127.
 ‘British Interests in the Eastern Mediterranean’, draft paper, 11 April 1975, BNA-FCO 46/1248, file DPI/515/1.
 Cabinet paper, 29 September 1976, in op. cit. Mallinson, William, Kissinger and the Invasion of Cyprus, p.134.
 Mallinson, William, Britain and Cyprus: Key Themes and Documents, I.B. Tauris, London and New York, 2011, and Bloomsbury, London and New York, 2020, pp. 87-121.
 Fergusson to Foreign Minister’s Private Secretary, minute, 8 December 1980, BNA-FCO 9/2949, file WSC/023/1, part C.
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