I am still shocked when I see how we underplay the deep routed social costs of the continued division of Cyprus. When working on the possible peace dividend of a solution, my co-authors (Fiona Mullen and Mustafa Besim) and I were constantly amazed how key failures of the economic infrastructure of the island were created due to the rift and unresolved conflict.
The Republic of Cyprus constitution separated the powers of the executive, the judiciary and the legislature, but kept substantial powers with the leaders of the three branches of government.
Checks on power have been removed.
The check on the power of the hegemons was the “other” community leader. With the exception of the judiciary, where the balance of power was held by a non-Cypriot, the power in all other institutions was checked by the other community.
The Central Bank of Cyprus, which was established in 1963, epitomises this basic principle of the Cypriot state. A very powerful Greek Cypriot governor was supposed to be kept in check by a Turkish Cypriot Vice-Governor. Both were (at least on paper) quite independent from the executive, who could only appoint them but not control their decision-making.
The separation of powers and the checks to power were not perfect, but it was hoped that communities’ interests would help contain any attempt at unilateral policies at the central bank.
The bloody events that began just before Christmas of 1963 and the subsequent withdrawal of the Turkish Cypriot community from the institutions of the Republic removed any checks and balances from the Greek Cypriot leaders of institutions such as the Central Bank.
Worse still, the arming of the two communities led to decisions made under the power of the gun, which is never an auspicious start in reshaping institutions. The real need for new necessary checks and balances was ignored. The above might explain how we had poor governance within institutions such as the Central Bank in the 1960s, as well as why independent authorities are often in conflict with each other. We have often seen the executive and the legislature being in open conflict with the Central Bank governor.
Politicians do change the constitution when it suits them.
The constitution is often placed by politicians as large an obstacle in promoting better governance.
Yet it cannot be as large an obstacle as the politicians would have us believe as we have radically re-shaped it in the legal framework in the past when it was in our interest.
For example, the largest modification of the whole body of Cypriot law took place with the entry of the island into the European Union.
In addition, the bail-in of depositors agreed in March 2013 was pushed through without serious constitutional issues in record time, yet a better monitoring of the finances of parliamentarians and their parties is being delayed due to constitutional impediments.
Thus we need to focus on why we have failed to introduce checks and balances in the Cypriot economic system in an effective way.
The answer lies in the fact that most of us do not want them in place.
Better governance is something that those in opposition demand and it is the first policy that is ignored when the opposition rises to positions of power. I had high hopes that the new board of the Cyprus Central Bank, armed with new powers, would implement changes for better governance.
But any changes will remain cosmetic if the appointment of the Governor and the board are still flavoured by the party-political clientelist system that has flourished in Cyprus since 1963.
By Alexander Apostolides
The writer is a Lecturer in Economic History at the European University Cyprus.