Cyprus – European Community/Union relations come across right after the establishment of the Republic of Cyprus. In 1961 ‘Preferential Trade Agreement’ was signed between the Republic of Cyprus and United Kingdom. The agreement aimed to lower the customs duties on particular goods had caused United Kingdom to become a significant market for the goods exported from Cyprus.

Due to application made on 1 August 1961 by United Kingdom to become a full member to the Community, the Republic of Cyprus had faced with the danger of the most important export market loss which made up 72% of total export products. Under these circumstances, the Republic of Cyprus was come up with the issue to send in an application for full membership to the Community. Turkish Cypriots had accepted this matter. In 1962 the Republic of Cyprus had applied to the Community for membership. Due to the problem occurred between the two communities in 1963, Turkish Cypriot Community would not be possible to participate in the negotiations held between the Community and the Republic of Cyprus.

After the negotiations carried out among the Greeks and the Community only, an agreement establishing partnership between the Community and Cyprus had been signed in Brussels on 19 December 1972 and the Agreement was come into force on 1 January 1973. With this Agreement, it was proposed to lift customs tariffs and other restrictions gradually in order to attain to the customs union. On 19 October 1987 a customs union agreement was signed between Cyprus and the Community after having various aids and certain period of time. The agreement had been taken effect on 1 January 1988.

On 4 July 1990 Greek Cypriot Administration had applied to the Community for full membership on behalf of whole Cyprus. Turkish Cypriot side had brought many objections and criticisms and defended that the application had to be rejected as it was not suitable to the law. Although there were objections and criticisms, European Union Commission had submitted an opinion to the Council in June 1993 which had approved the application. On 24 – 25 June 1994 a decision was taken in Greece during the Korfu Summit related with evaluation of the Cyprus application progress and to speed up negotiations with EU for the acceptance of Cyprus. During the Essen Summit in Germany on 9 December 1994 it was stated that Cyprus would be included in the first enlargement. On 12 – 13 December 1997 a decision was made during Luxembourg Summit related with the beginning of full membership negotiations between Cyprus. Upon the decision taken, full membership negotiations had started between EU – Cyprus on 30 March 1998. At the end of the negotiations, Cyprus has become a full member to the European Union from 1 May 2004.

The European Council had repeatedly underlined its strong preference for accession by a reunited Cyprus to the European Union. However, the UN plan for a comprehensive settlement of the Cyprus problem failed to gain the necessary support at the simultaneous referenda held in Cyprus on 24 April 2004. While the Turkish Cypriots approved it by a margin of 2:1, Greek Cypriots rejected it by a margin of 3:1. Thus, Cyprus acceded to the EU, as a de facto divided island on 1 May 2004.

In light of Protocol 10 of the Accession Treaty 2003 Cyprus as a whole entered the EU, whereas the acquis is suspended in the northern part of the island (“areas not under effective control of the Government of the Republic of Cyprus”). This means inter alia that these areas are outside the customs and fiscal territory of the EU. The suspension has territorial effect, but does not concern the personal rights of Turkish Cypriots as EU citizens, as they are considered as citizens of the Member State Republic of Cyprus.

DG Enlargement has set up a Taskforce “Turkish Cypriot Community” dealing with the consequences of this unique and complex situation. It exists since 1 May 2004, the date of accession of the Republic of Cyprus to the EU.

Through the Green Line Regulation (Council Regulation No 866/2004) adopted on 29 April 2004 the Council defined on the basis of a Commission proposal the terms under which the provision of EU law shall apply to the so called Green Line in Cyprus. The Regulation deals with the movement of persons and goods through the line.

In order to facilitate the future reunification of Cyprus, DG Enlargement is implementing an Institution Building programme through the TAIEX instrument in order to help prepare the Turkish Cypriot community for the future application of Community Law. This should pave the way for the withdrawal of the suspension of the acquis in the case of a Cyprus settlement as provided for in Article 1 (2) of Protocol 10 of the Accession Treaty 2003.

Following the outcome of the referenda the Council stated on 26 April 2004:

“The Turkish Cypriot community have expressed their clear desire for a future within the European Union. The Council is determined to put an end to the isolation of the Turkish Cypriot community and to facilitate the reunification of Cyprus by encouraging the economic development of the Turkish Cypriot community. The Council invited the Commission to bring forward comprehensive proposals to this end with particular emphasis on the economic integration of the island and on improving contact between the two communities and with the EU.”

Responding to this invitation of the Council the Commission proposed on 7 July 2004 a comprehensive package of aid and trade measures: The regulation on establishing a legal instrument for encouraging the economic development of the Turkish Cypriot community (“Aid Regulation”) and the regulation on special conditions for trade with those areas of the Republic of Cyprus in which the Government of the Republic of Cyprus does not exercise effective control (“Direct Trade Regulation”). The Council has approved the aid regulation on 27 February. Because of the delayed adoption €120 million (of the € 259 million originally earmarked) which were set aside under the 2005 budget have been lost as they could not be carried forward to 2006 in the absence of a legal basis. €139 million remain to be spent under the newly adopted aid regulation.

On 27 October 2006, the Commission had adopted a financing decision for a total of €38.1 million to encourage the economic development of the Turkish Cypriot community. The financial assistance will focus on three objectives:

1. developing physical infrastructure,
2. promoting economic and social development and
3. bringing the Turkish Cypriot community closer to the European Union.

In February 2006 the EU member states have adopted an Aid Regulation[1] of €259 million. The overall objective of the financial assistance provided by the European Union is to facilitate the reunification of Cyprus by encouraging the economic development of the Turkish Cypriot community with particular emphasis on the economic integration of the island, on improving contacts between the two communities and with the EU, and on preparation for the gradual adoption of the European Union’s legal order. Today’s decision is committing €38.1 million of this overall amount for concrete projects.

Following the adoption of the financing decision Commissioner Rehn stated: “I welcome today's decision that enables us to realise concrete projects bringing the Turkish Cypriot Community closer to Europe. It is another step by the EU towards putting an end to the isolation of this community and thus facilitating the reunification of Cyprus. I also encourage the member states to take the next step and adopt our proposal from 2004 on direct trade between the EU and the Turkish Cypriot community."

From the €38.1 million the following six projects will be supported:

1. Solid waste sector programme for the Turkish Cypriot community;
2. Feasibility study for the rehabilitation of the Lefke/Lefka mining area;
3. Upgrading the management of the energy sector;
4. Upgrading of urban and local infrastructure;
5. Supporting private sector development within the Turkish Cypriot community;
6. Information on the European Union political and legal order.

The second part of the financial assistance will be adopted before the end of 2006, after the favourable opinion of the Phare Management Committee on 20 October 2006.

For the implementation of the assistance, the Commission has put in place a Programme Team composed of Commission officials and contract agents working both in Brussels and in Cyprus. The addresses of the programme team will be in Brussels and at the Representation of the European Commission in Cyprus.

This team will be using a Programme Support Office in the northern part of Cyprus to facilitate contacts with the beneficiary community, with a view to ensuring cost-effective coordination, preparation and implementation of the assistance, whilst also providing a venue for meetings and seminars. The Programme Support Office has been operational since mid-September undertaking preparatory activities.