Cyprus: Reunification Proving Elusive

Vincent Morelli
Section Research Manager

Attempts to resolve the Cyprus problem and reunify the island have undergone various levels of negotiation for over 45 years. Throughout 2011, Cyprus President Demetris Christofias and Turkish Cypriot leader Dervis Eroglu have continued the negotiation process but have thus far failed to reach a mutually agreed settlement.

Although both sides have intimated that some convergence of views have been achieved in the areas of governance, economy, and EU issues, Christofias and Eroglu have not found common ground on the difficult issues of property rights, security, settlers, and citizenship, areas where both sides have long-held and very different positions and where neither side seems willing or able to make necessary concessions. This stalemate has resulted in a solution for unification far from being achieved and has raised the unfortunate specter of a possible permanent separation.

On July 7, 2011, Christofias and Eroglu traveled to Geneva to meet for a third time with U.N. Secretary-General Ban Ki-moon in another attempt by the U.N. to boost momentum for the talks. Ban suggested that the negotiations conclude by October so that an international conference could be held to discuss security issues and that referenda could be scheduled in both the north and south by the spring of 2012. The hope among some is that a reunified Cyprus can assume the rotating presidency of the EU on July 1, 2012.

Over the course of the summer, four events have raised serious doubts regarding a settlement being reached even by the end of 2011, let alone by the October target. The results of parliamentary elections held in Greek Cyprus in May initially appeared to have had no bearing on the status of the negotiations. Recently, however, the last remaining partner in the governing coalition, the DIKO Party, withdrew from the coalition, leaving President Christofias without a majority in Parliament and isolating him in the negotiations. On July 11 a tragic munitions explosion at the Mari naval base killed several people and damaged a major power generating station. Christofias has borne the wrath of the Cypriot people for this tragedy and has been forced to reshuffle his cabinet and defend his Presidency. Third, in mid-July, Turkish Prime Minister Erdogan, on a visit to northern Cyprus, warned that an agreement needed to be achieved by the end of 2011 or the island could remain split and stated that no security or territorial compromises by the Turkish Cypriots would be acceptable. He also stated that Turkey would essentially freeze its relations with the EU during the Cypriot presidency of the EU if there were no solution to the Cyprus issue because Ankara could not accept the presidency of South Cyprus, which it does not recognize. These comments led Cypriot President Christofias to state that there could be no prospect for peace if this was also the position of the Turkish Cypriots. Finally, the Government of Cyprus announced that it would soon begin drilling for natural gas off the southern coast of Cyprus prompting both Ankara and the Turkish Cypriots to protest that such a move would jeopardize the settlement negotiations.

The United States Congress continues to maintain its interest in a resolution of the Cyprus issue. Language expressing continued support for the negotiation process has been included in the House FY2012 Foreign Assistance Authorization bill.

This report provides a brief overview of the early history of the negotiations, a more detailed review of the negotiations since 2008, and a description of some of the issues involved in the talks.


Date of Report: August 23, 2011
Number of Pages: 23
Order Number: R41136
Price: $29.95

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Greece’s Debt Crisis: Overview, Policy Responses, and Implications

Rebecca M. Nelson, Coordinator
Analyst in International Trade and Finance

Paul Belkin
Analyst in European Affairs

Derek E. Mix
Analyst in European Affairs

The Eurozone is facing a serious sovereign debt crisis. Several Eurozone member countries have high, potentially unsustainable levels of public debt. Three—Greece, Ireland, and Portugal—have borrowed money from other European countries and the International Monetary Fund (IMF) in order to avoid default. With the largest public debt and one of the largest budget deficits in the Eurozone, Greece is at the center of the crisis. The crisis is a continuing interest to Congress due to the strong economic and political ties between the United States and Europe. 

Build-Up of Greece’s Debt Crisis 

In the 2000s, Greece had abundant access to cheap capital, fueled by flush capital markets and increased investor confidence after adopting the euro in 2001. Capital inflows were not used to increase the competitiveness of the economy, however, and European Union (EU) rules designed to limit the accumulation of public debt failed to do so. The global financial crisis of 2008-2009 strained public finances, and subsequent revelations about falsified statistical data drove up Greece’s borrowing costs. By early 2010, Greece risked defaulting on its public debt. 

Policy Responses with Limited Success 

EU, European Central Bank, and IMF officials agreed that an uncontrolled Greek default could trigger a major crisis. In May 2010, they announced a major financial assistance package for Greece, and the Greek government committed to far-reaching economic reforms. These measures prevented a default, but a year later, the economy was contracting sharply and again veered towards default. European leaders announced a second set of crisis response measures in July 2011. The new package calls for holders of Greek bonds to accept losses, as well as for more austerity and financial assistance.

These responses have prevented a disorderly Greek default, but the prospects for Greek recovery remain unclear. The economy is contracting more severely than expected, and, as a member of the Eurozone, Greece cannot depreciate its currency to spur export-led growth. Unemployment is close to 16%.

Additionally, the policy responses have not contained the crisis. Ireland and Portugal turned to the EU and IMF for financial assistance. In the summer of 2011, interest rates on Spanish and Italian bonds rose sharply. 

Broader Implications 

Greece’s economy is small, but its crisis exposes the problems of a common currency combined with national fiscal policies. Additionally, its crisis set precedents for responding to crises in other Eurozone countries; highlighted concerns about the health of the European financial sector; created new financial liabilities for other Eurozone countries struggling debt; and sparked reforms to EU economic governance. It has also revealed tensions among EU member states about the desirability of closer integration. 

Issues for Congress 

• Impact on the U.S. economy: U.S. exports to the EU could be impacted if the crisis slows growth in the EU and causes the euro to depreciate against the dollar.
  Through the first quarter of 2011, growth in the Eurozone was strong, but it may be starting to weaken. There has not been a clear depreciation of the euro against the dollar since the start of the crisis. As the crisis continues, increased perceptions of risk are impacting U.S. financial markets. If the crisis spreads in the Eurozone, the impact on the U.S. economy could be much greater.
• Exposure of U.S. banks: U.S. banks have little direct exposure to Greece ($7.3 billion), but other potential exposures (derivative contracts, guarantees, and credit commitments) to Greece are much higher ($34.1 billion). U.S. banks are more heavily exposed to Spain and Italy, with direct and other potential exposures totaling nearly $450 billion. 
• IMF involvement: Some Members of Congress are concerned about IMF involvement in the Greek crisis. In 2010, Congress passed legislation aimed at limiting IMF support for advanced economies (P.L. 111-203). In 2011, legislation was introduced in the House and the Senate to rescind some U.S. contributions to the IMF (H.R. 2313; S.Amdt. 501). The Senate voted down this legislation in June 2011.

Date of Report: August 18, 2011
Number of Pages: 24
Order Number: R41167
Price: $29.95

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The European Union: Foreign and Security Policy

Derek E. Mix
Analyst in European Affairs

The United States often looks to Europe as its partner of choice in addressing important global challenges. Given the extent of the transatlantic relationship, congressional foreign policy activities and interests frequently involve Europe. The relationship between the United States and the European Union (EU) has become increasingly significant in recent years, and it is likely to grow even more important. In this context, Members of Congress often have an interest in understanding the complexities of EU policy making, assessing the compatibility and effectiveness of U.S. and EU policy approaches, or exploring the long-term implications of changing transatlantic dynamics.


Date of Report: August 15, 2011
Number of Pages: 29
Order Number: R41959
Price: $29.95

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U.N. Convention on the Law of the Sea: Living Resources Provisions

Eugene H. Buck
Specialist in Natural Resources Policy

The United Nations Convention on the Law of the Sea (LOS Convention) was agreed to in 1982, but the United States never became a signatory nation. The Senate Committee on Foreign Relations reported the LOS Convention on December 19, 2007. The Senate may choose to address the ambiguities of the LOS Convention with its power to make declarations and statements as provided for in Article 310 of the LOS Convention. Such declarations and statements can be useful in promulgating U.S. policy and putting other nations on notice of U.S. interpretation of the LOS Convention.

In the 111th Congress, Secretary of State Hillary Clinton, at her confirmation hearing before the Senate Committee on Foreign Affairs on January 13, 2009, acknowledged that U.S. accession to the LOS Convention would be an Obama Administration priority. Later in this confirmation hearing, Senator John Kerry, the committee chair, confirmed that the LOS Convention would also be a committee priority. However, the Senate took no action on the LOS Convention during the 111th Congress. In the 112th Congress, the Administration is continuing to encourage Senate action on the LOS Convention.

A possible benefit of U.S. ratification would be the international community’s anticipated positive response to such U.S. action. In addition, early U.S. participation in the development of policies and practices of the International Tribunal for the Law of the Sea, the Commission on the Limits of the Continental Shelf, and the International Seabed Authority could help to forestall future problems related to living marine resources. On the other hand, some U.S. interests view U.S. ratification as potentially complicating enforcement of domestic marine regulations, and remain concerned that the LOS Convention’s language concerning arbitrary refusal of access to surplus (unallocated) living resources might be a potential source of conflict (in addition to concerns about other provisions of the Convention). These uncertainties reflect the absence of any comprehensive assessment of the social and economic impacts of LOS implementation by the United States.

This report describes provisions of the LOS Convention relating to living marine resources and discusses how these provisions comport with current U.S. marine policy. As presently understood and interpreted, these provisions generally appear to reflect current U.S. policy with respect to living marine resource management, conservation, and exploitation. Based on these interpretations, they are generally not seen as imposing significant new U.S. obligations, commitments, or encumbrances, while providing several new privileges, primarily related to participation in commissions developing international ocean policy. No new domestic legislation appears to be required to implement the living resources provisions of the LOS Convention.


Date of Report: August 11, 2011
Number of Pages: 14
Order Number: RL32185
Price: $29.95

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