Harris Georgiades - Minister of Finance, Republic of Cyprus HARDtalk


Harris Georgiades - Minister of Finance, Republic of Cyprus

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road. Bail was set at $2,500. Now on BBC News it's time for

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HARDtalk. Work and HARDtalk. When Harris

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Georgiades became finance minister of Cyprus in 2013 some said he had

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been handed a poisoned chalice. He has had to preside over tough

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austerity measures that are driving up poverty levels in the country.

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The economy is shrinking, unemployment will perhaps reach 20%

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this year and wages are being slashed. These were the tough

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conditions of a ten billion euro bailout granted last year with the

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troika of the European Central Bank, the EU and the IMF to avoid a

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collapse of the banking system in Cyprus. So why then does the finance

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minister believe that the economy is proving more resilient than

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expected? Is he being too optimistic?

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Harris Georgiades, welcome to HARDtalk. Thank you. It is nearly a

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year since you were appointed finance minister. Were you handed a

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poisoned chalice? The economy was left in a grave situation. We

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received it as a newly elected Parliament. We received the crisis

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of unimaginable proportions. Unfortunately, I think those grave

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dangers are already behind us. Maybe I do sound overly optimistic, I am

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not. I think I am being realistic. So, those grave dangers are behind

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you? Some estimates say unemployment could reach more than 20%. You have

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negative growth, -5% for this year. The health public wages and others

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being slashed by as much as 25%. -- you have. Are you being too

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optimistic? We are facing the risk of a total collapse in the economy.

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The collapse of the banking system. Exit from the eurozone, even from

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the EU, somewhat speculating. Those dangers, we have overcome them. A

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few weeks ago, the IMF will today whole range of indicators. All they

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said was that you were facing a slump over the next ten years. You

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will be facing a decade of these conditions. I do not think so. The

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IMF itself has revised its assumptions upwards. I hope I am

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being very honest. Revised upward? They said it would be negative

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growth of -7%. They have brought that up. They said -9, it is now

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-6%. I am not saying it is a good performance, obviously. The economy

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was seen as in great danger. We had the threat of a total collapse.

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Since then, we have stabilised the situation. Some difficulties remain,

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like unemployment. It is not really a new situation. It is very

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important. We saw the protests over austerity measures. The IMF has said

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that political support for the troika's programme is diminishing.

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97% of the Cypriots economy, people thought that the economy was in bad

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shape. They said it was headed in the wrong direction. You are saying

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it is getting better. You spoke of unrest, there is none of it. In

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Cyprus, we have not seen anything like the Labour action we have seen

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elsewhere. There was not a day of strike. The capital is very

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understanding of the situation. The population say the country is headed

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in the wrong direction. It would not sound as though they have a huge

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amount of confidence in what you were doing. We are trying not to

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look at the polls. Since you are speaking about the polls, we are

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doing well. The government and government policy are doing well

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with the public. We have been able to get legislation relating to the

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foreign programme through Parliament. We have had no delays.

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Already, I think we are able to see results. Do not take my word, we

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have had the first upgrade. You are in a terrible mess. Overexposure to

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Greek debt in banks. We have had the first upgrade from a ratings

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agency, standard and Poor 's, in the past three years. We have been

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receiving downgrades for years. So you have moved up to be minus? You

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feel that you are moving up. It is what led the finance minister in

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France to say that Cyprus is a casino economy on the brink of

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bankruptcy. Do you accept that your problems were of your own making?

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Not you specifically, but the authorities. The problems are local,

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I have two admit that. Other European leaders said things about

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the economy. I will make honest admissions. The problems of the

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Syrian economy -- Cypriots economy are the result of our own decisions,

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our own failures. As far as public finances are concerned, and also

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banking. We are acknowledging that the problems, it allows us to take

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control of the situation and explain to the public that we are fixing the

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problems. When the finance minister at the time said that it is always

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striking that a country with a relatively small population attracts

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high bank deposits from foreign investors. This model is bankrupt.

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We did have an oversized banking system. The smaller the economy, the

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banking system will be larger compared to the population. If the

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two Iceland and Ireland. We already have a much smaller banking system.

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Already, it is a better banking system. Better regulated. Better

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regulated you say. I have to put it to you. These high levels of Russian

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deposits, Russian money. There were some kind of money laundering going

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on. This is what was being said. Russian authorities say all the

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money they put in Cyprus was clean. Part of the ruling coalition in 2012

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cents, we can not use taxpayer money to guarantee the deposits of illegal

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Russian money in Cypriots banks. Was the money-laundering in Cypriots

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banks? We want to clear a man once and for all. We are going to audit.

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Both by the European institutions, and an independent firm they were

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looking to how we are implementing regulation. They will offer opinion.

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It is an opinion that was represented at Europe. It is not

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verified. However, many shortcomings, and there are

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shortcomings when it comes to money laundering, are beyond us. It does

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exist. It is a global problem. We are determined to do what is

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necessary. It has been so thoroughly investigated. We have taken action.

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So you have done a restructuring, you admit you need a better system

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to restore confidence in Cyprus and outside in your banking system. Do

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you really think you are making a good job of that? We have this

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highly publicised row between the governor of the central bank in

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Cyprus and the President. The President even tried to get the

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governor removed from his post. That does not look good, it does not

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restore confidence in the banking system, does it? I will say this,

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there is an issue regarding the role and responsibility of central banks.

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Before, we had no interest in central banks needing to be

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independent and acting independently, . The authority of a

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central bank should not be in the hands of one person. There should be

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checks and balances, they should be... Of course. I was asking you,

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there is a big row, a dysfunctional relationship between the President

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and the head of the central bank. As one of the arms of Cyprus's battle

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system, is that a situation that is viable? We are trying to handle the

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situation. We are looking at the issue, not a personal basis, but an

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institutional basis. There needs to be accountability and transparency,

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especially when it comes to such an important area. Should he resign? I

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am a 20 get into the discussion. There is an investigation by an

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independent prosecutor. I will not comment. Very quickly, on this

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matter, one of the areas of disagreement is lifting the controls

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on transfers of funds from Cyprus. When will that happen? With a lid

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might happen early this year. We have an agreed roadmap between

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ourselves and Cyprus. This roadmap, if we are to translate it into a

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timeframe, most of the restrictions would be gone by this year. That is

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our objective. That is our stated objective. We want the regulations

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to go by springtime. The last on the list will be the transfer of funds

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abroad, a simple transfer. We will wait for that announcement. Wouldn't

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it be nice if Cyprus could commercially risk -- exploit those

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energy reserves offered shores. It will help Ulster your budget,

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wouldn't it? Something like $800 million. You would like that money,

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wouldn't you. Week you know how much we are counting for a dare. This is

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good. We will do whatever else is necessary to fix the economy, to

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make it more competitive, better functioning and these energy

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prospects will be another. It will be very different. It is huge and

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important. It is not a substitute to real economic reform, and fiscal

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change. Looking at that change. Looking to the future, you said you

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said energy is being pursued in a decisive manner. To maybe have it

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licensed out to a number of potential gas fields offshore.

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Having the first exploratory drilling is and they have been

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successful. There will be more sick -- exploration this year. There is a

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timeframe is very promising and which really needs to be able to

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offer an economy. You said about a ten year slab. I do not agree. We

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could be one of the fastest economies in the European Union. You

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could be right. I do not write about upsetting Turkey? The self-declared

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Republic of North Cyprus. The -- declared in 1983. Only recognised by

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Turkey. Are you not worried about upsetting Ankara? It said any gas

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exploration in the sea waters should be undertaken by both committees.

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The Foreign Minister has warned your government, the Cypriot authorities

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are on adventurous policies in this regard. You have resonated threats

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buy the Turkish government. I don't think any EU member state should bow

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to threats. You will fully agree that these prospects and the other

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prospects relating to the prosperity and progress of South Cyprus should

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be shared with all of the people. We have the strongest incentive of

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anyone to resolve the problem of the division of Cyprus so the fruits of

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our economic to mail -- development will be shared. As you have said,

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regrettably, so many years Turkey maintains 35,000 troops and they are

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the reason why this prospect for a common future have not yet been

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realised. Are you not worried about upsetting them? What is your legal

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right to do? Is always the best route, is it, if you end up in

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raging Turkey? Nobody is comfortable when they are being threatened but

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nobody thinks about these threats that are completely un- founded,

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legally or morally. We are a member of the European Union. The gas

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fields have been licensed to international corporations. We are

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working very well with other neighbours in the region, Israel,

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Egypt's, London on we share the common natural resources. --

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Lebanon. We shall proceed. Economic, doesn't it make sense for

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you to do this with the cooperation of Turkey? A pipeline to Turkey into

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Turkey would be the easiest way for you to get this and the oil out

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rather than be confined. Economically it make sense for you

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to do this. Turkey is one of the biggest economies in the world.

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Until recently, a very dynamic economy. Everybody is thriving to

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access to this big market. We are immediate neighbours to Turkey and

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we have no access to this market. Cypriot ships cannot access... What

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is the point of upsetting Turkey? What I am trying to say is I agree

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that the prospects of corporation, of trade are enormous but how can we

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discuss the possibility of exporting gas or oil through Turkey when

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ships, merchant ships with a Cypriot flag, cannot even access Turkish

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cities. When there is no connection, flights between Cyprus and Turkey.

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Let's start from the basics. C acts and not only words on the part of

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Turkey and we fully agree that cooperation would be best for the

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region as a whole. The question is this, will these new-found reserves,

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they can either in -- inflame or solve the Cyprus problem.

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Reunification. The Turkish energy minister said that energy is

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produced in other parts of the world, here it will be a force for

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peace. We will make sure it is a force for peace and that is why we

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are cooperating with our neighbours, or the original actors

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and we hope that Turkey is able to join in this regional cooperation

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not only regarding energy but on other issues. What about the talks

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to try to reunify the two parts of Cyprus, the Republic which is

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recognised by everyone and the self declared Turkish part. You are

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working in a confederation. You want a joint declaration before you can

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even start talking. Why is the joint declaration so important? It is a

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small but important test that we are indeed in agreement at least as far

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as the objective. There is no point trying to negotiate when nobody

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agrees with the objective. You said the objective is to have a

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federation. One state but with two federal zones. With significant

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autonomy on day-to-day issues. It is alarming that the Turkish city

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leader will not utter a word of federation. That is the reason

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why... White-matter your promise is sovereignty as well, they say the

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Turkish Cypriot leader say that the two sides must drop the exchange of

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documents and start talks on an agreement. You asking for an

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addition to that. We need to verify and agree on the objectives. If one

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wants to go right in the other wants to go left, there is no point. He

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says he is ready for a deal on political equality, are you ready to

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give him that? Of course, of course, definitely. Within the framework of

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a federation and the legal sovereignty that we have mentioned.

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That is not an unreasonable thing to ask. The important thing is to get

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together and talk. There is no state in the world without single

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sovereignty. I don't think is is an obstacle. It is an absolutely

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necessary precondition if this will succeed. We want to be a member of

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the European Union after the solution. These are the

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fundamentals. In October we are going to be talking by Christmas,

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you are overoptimistic. One everything. This as well as the

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economy. We are facing challenges and we have a vision. The vision is

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to transform Cyprus and turn it into a island of stability. Cyprus is an

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excellent place to live, spent holidays and invest and this will be

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to the benefit of the region. Thank you very much for coming on

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HARDtalk. More warnings are in force of the

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day ahead,

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