At the same time, IMF technocrats are going in and out of north Cyprus trying to assess the state of play of the banks and public service in the Turkish-held area which is heavily reliant on Ankara money.

Giving serious attention to such technical matters seems to be a measure of the optimism surrounding the latest UN-brokered Cyprus peace talks aiming to reunite the island divided since a 1974 Turkish invasion.

“It should take some weeks, a couple of months, before the Fund’s technocrats whose role is not political but only advisory should be able to have a clear picture,” a source said. Both the IMF and World Bank begin their study in earnest in February last year.

“A reunited federal Cyprus should have a viable economy and a viable economy means a viable public debt; nobody seems to know what will happen to the north’s debt which now falls on Ankara’s shoulders,” added the source.

Last week, Finance Minister Harris Georgiades described the north’s banking system as “a bit of a wild-west situation. Nobody knows enough about ownership, capitalisation and supervision”.

He also warned that unless the new federal state envisaged under a peace settlement adopts binding rules on fiscal discipline and financial-sector stability any deal is doomed to fail.

A post-settlement Cyprus must have a balanced budget clause in its constitution that would impose fiscal responsibility not only on the federal government but on the autonomous Greek Cypriot and Turkish Cypriot entities, the minister said.

The two entities would run most day-to-day affairs in the island’s two communities.

An insider told the press that some 80% of Turkish Cypriots work in the public sector; a small percentage are farmers and an even smaller percentage seem to be “quite rich” since they are the ones doing business with Turkey.

Source: InCyprus