Exiled Cypriots’ Homecoming Dream Thwarted by Turkey Scandal

Photographer: Yiannis Kourtoglou/AFP via Getty Images

A Turkish military sign stands next to a deserted building of the tourist area of Varosha, in the fenced off area of Famagusta. Signs with the stencil of an armed soldier warn the area is a forbidden zone. Close

A Turkish military sign stands next to a deserted building of the tourist area of... Read More

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Photographer: Yiannis Kourtoglou/AFP via Getty Images

A Turkish military sign stands next to a deserted building of the tourist area of Varosha, in the fenced off area of Famagusta. Signs with the stencil of an armed soldier warn the area is a forbidden zone.

In the port of Famagusta, Greek-Cypriot hotelier Dinos Lordos threw rooftop cocktail parties for wealthy English visitors to sell them vacation apartments overlooking the Mediterranean Sea.

Then, in 1974, the invading Turkish army split Cyprus, putting an end to the family business and sealing off part of the city, among the richest in the world during medieval times. A millionaire in his thirties, Lordos said he became “a refugee with a Jaguar” overnight.

Four decades later, Lordos and his son are plotting a return as the worst economic meltdown since the invasion spurs Greek and Turkish Cypriots to look at ways out of the crisis. They’ve been encouraged by a flurry of talks in recent weeks involving the divided island’s political leaders. Their concern is whether events in Turkey, this time a corruption scandal, will sink their plans yet again.

“What is happening in Turkey complicates the issue and we need to wait to find out how it will develop,” Lordos, 73, said this week. “A solution to Cyprus can only come if it is imposed from outside, like what happened with the economic crisis.”

Cyprus’s 10 billion-euro ($13.6 billion) rescue package by the European Union and International Monetary Fund last March called for government spending cuts and a shrinking of the financial industry whose growth ultimately led to the island’s downfall. Like Greece, unemployment has since risen to a record as the economy contracts.

Photographer: Yiannis Kourtoglou/AFP via Getty Images

Varosha's deserted hotels stand behind Famagusta's coast. Close

Varosha's deserted hotels stand behind Famagusta's coast.

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Photographer: Yiannis Kourtoglou/AFP via Getty Images

Varosha's deserted hotels stand behind Famagusta's coast.

Biggest Step

Resurrecting Famagusta’s beachfront district of Varosha, empty and rotting under Turkish oversight since 1974, would be the biggest step toward reunification of the island, according to Cypriot President Nicos Anastasiades.

Anastasiades and Turkish Cypriot leader Dervis Eroglu met on Nov. 25 in the United Nations-controlled buffer zone that runs through the divided capital Nicosia to craft a joint statement on the aims of a new round of talks.

They walked away without an agreement, and meetings since then failed to break the deadlock. Anastasiades will visit London next week and is scheduled to meet Prime Minister David Cameron, according to the Cyprus News Agency. The U.K., along with Turkey and Greece, is a guarantor power for the Cypriot state since the island won independence from Britain in 1960.

Complex Question

“It’s not the complexity of it all, it’s the infinity of it all,” said James Ker-Lindsay, a senior research fellow at the London School of Economics and author of “The Cyprus Problem.”. “There’s about six or seven key areas and we know the rough parameters of a solution in each of them. We know what it’s going to look like. It’s just that there hasn’t been that political will to sit down and do the deal.”

Photographer: Yiannis Kourtoglou/AFP via Getty Images

A view of deserted buildings in Varosha is seen in the fenced off area of Famagusta. Close

A view of deserted buildings in Varosha is seen in the fenced off area of Famagusta.

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Photographer: Yiannis Kourtoglou/AFP via Getty Images

A view of deserted buildings in Varosha is seen in the fenced off area of Famagusta.

While Anastasiades, 67, spoke with UN Secretary-General Ban Ki-Moon by telephone on Dec. 18 to discuss the next move in a rapprochement, attention since then has turned to Turkey, where Prime Minister Recep Tayyip Erdogan is contending with the largest corruption scandal in the country’s history.

The investigation led to the resignation of three cabinet ministers, while executives from companies winning government contracts are among the 100 people who have been arrested, questioned or pursued since the 15-month probe become public on Dec. 17. Erdogan has called it an attempted coup.

“Any concession on Cyprus at this stage could be read as an obvious sign of political weakness,” said Ker-Lindsay. “This is the last message Erdogan would want to convey.”

Growth Push

The hope among Cypriot politicians is that, along with the discovery of gas fields in the eastern Mediterranean, reviving Varosha would provide a fillip to growth that can lift Cyprus out of economic malaise more effectively than the bailout recipe set out by the EU and IMF. Rebuilding the resort will cost as much as 5 billion euros, said Nikos Mesarites, head of the Greek Cypriot reconstruction board, set up to oversee building projects and resettlement in the event of a solution.

“For Greek Cypriots, reunification will open up the closest, biggest and fastest-growing regional market of 70 million Turks while Turkish Cypriots will enjoy direct access to 380 million Europeans,” said Fiona Mullen, director of Sapienta Economics in Nicosia. She is part of a group pitching a plan to make Varosha and its environs Europe’s model “eco-city.”

Anastasiades has said the return of Varosha to its inhabitants could be a game-changer, creating jobs, cementing confidence between the two communities and prompting concessions to aid the stalled EU membership ambitions of Turkey, which keeps 30,000 troops in the north of the island.

Economic Tailspin

One of the few Greek Cypriot politicians to support a failed 2004 UN unification plan, Anastasiades’s election in February was quickly overrun by a chaotic financial rescue that included budget austerity, seizing cash from bank depositors, and a two-week shutdown of the island’s banking industry. Then came the euro area’s first capital controls, which were renewed for another 28 days on Dec. 20.

The Cypriot economy is forecast to decline almost 13 percent over this year and next. Varosha can play a part in mitigating that, Anastasiades said.

“Imagine how much this will contribute to dealing with the economic crisis, a final solution to the Cyprus issue,” he said in a September interview in Nicosia. “It will give Greek Cypriots and Turkish Cypriots an opportunity to cooperate in the rebuilding of the city. We’re talking about a ghost town which for 39 years has remained uninhabited.”

Fleeing Famagusta

Lordos’s eldest son, George, 46, remembers his father and uncles taking turns watching for air raids in Famagusta after the first wave of the Turkish invasion in July 1974, sparked by a Greek-backed coup of supporters of union with Greece.

His late mother bundled 7-year-old George and his two younger brothers into a car and fled the city while his father served in the military. Now he’s at his family’s hillside complex in Pyrga in the south of Cyprus, flicking through a slide presentation of what his former family home could become.

The plan is to turn Varosha into a centerpiece of a rejuvenated Famagusta that will draw tourists, extending the beachfront, providing incentives to owners to revamp their properties and opening the port.

Dinos Lordos successfully sued Turkey over the seizure of his properties at the European Court of Human Rights, though said he’s still waiting for any money. He would plow any he eventually gets back into Varosha to help revive a city whose riches and maritime prominence rivaled Venice in the 13th century. First, the Greek and Turkish Cypriots have to get their act together, he and his son said.

Sealed Off

“Politics is full of surprises and reversals,” George Lordos said this week. “We could see movement again on the Cyprus issue in the second half of this year after a directionless first half.”

Famagusta had been a playground for the rich and famous. Actress Elizabeth Taylor would stay at the Argos Hotel. Otto Preminger used the city as the site for his blockbuster film Exodus, starring Paul Newman. Inhabited since antiquity, it was once known as the city of 365 churches, for boasting as many churches as days in the year at its peak.

The only signs of movement in the enclosed area of Varosha now are the waves lapping at the makeshift bulwarks placed at the foundation of the hotels on the foreshore. The mesh fence surrounding the area has collapsed in places.

Signs with the stencil of an armed soldier warn the area is a forbidden zone in five languages. The sealed-off area includes more than 100 hotels, 5,000 houses and business, museums, churches and schools, according to the Brussels-based International Crisis Group.

Illuminated Flag

Property rights and compensation were among the sticking points that prevented a reunification settlement in 2004. Even with the island at what Lordos calls “a comfortable peace” since 2003, when Cypriots were able to cross the dividing line after the Turkish side lifted restrictions, identification is still required to move between the north and south.

Most Greek Cypriots lose their mobile-phone signal from Cypriot providers after crossing the border because of a lack of roaming agreements. On the face of the mountain overlooking Nicosia is a flag of the Turkish side that lights up at night.

Hasan Ince, a Turkish Cypriot businessman who has lived in Famagusta all his life, said politicians are out of touch with the majority of Turkish Cypriots in Famagusta, pointing to an opinion poll showing that 83 percent favor a return of Varosha. He is a member of the Bicommunal Famagusta Initiative, which lobbies for the return and opening of the port.

“The politicians are not moving ahead,” he said in his store, crammed with coolers and other electronic appliances from Turkey, Slovenia and Germany. “They are trying to announce a one-page document and they couldn’t manage over four months. We cannot leave this problem to the politicians anymore.”

Opening up Famagusta to development, along with measures to foster trade and energy links, would be a way of building confidence between the two sides, says Dinos Lordos.

“These are relatively easy with low political cost,” he said in an e-mail, citing the ancient Chinese proverb that a journey of 1,000 miles begins with a single step. “This is the only way for the Cyprus problem.”

To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net; Georgios Georgiou in Athens at ggeorgiou5@bloomberg.net

To contact the editor responsible for this story: Stephen Foxwell at sfoxwell@bloomberg.net

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