About
Cyprus

Economy of Cyprus

ECONOMY*

(* Section refers to the government-controlled area unless otherwise specified.)

Cyprus has an open, free-market, services-based economy with some light manufacturing. Cyprus' accession as a full member to the European Union as of May 1, 2004, has been an important milestone in its recent economic development. The Cypriots are among the most prosperous people in the Mediterranean region. Internationally, Cyprus promotes its geographical location as a "bridge" between three continents, along with its educated English-speaking population, good airline connections, and telecommunications.

In the past 20 years, the economy has shifted from agriculture and light manufacturing to services. Currently, agriculture makes up only 2.4% of the GDP and employs 7.5% of the labor force. Industry and construction contribute 19.0% and employ 20.4% of the labor force. The services sector, including tourism, contributes 78.6% to the GDP and employs 72.1% of the labor force. In recent years, the services sector, and financial services in particular, have provided the main impetus for growth, while tourism has been declining in importance. Manufactured goods account for 58.3% of domestic exports, while potatoes and citrus constitute the principal export crops. The island has few proven natural resources, although it is now gearing up to begin exploration for natural gas off its southern coast. Trade is vital to the Cypriot economy and most goods are imported. The trade deficit increased in 2008, reaching $9.1 billion. Cyprus must import fuels, most raw materials, heavy machinery, and transportation equipment. More than 67% of its imports come from the European Union, particularly Greece, Italy, and the United Kingdom, while 1.7% come from the United States.

GNP growth rates have gradually begun to decline as the Cypriot economy has matured over the years. The average rate of growth went from 6.1% in the 1980s, to 4.4% in the 1990s, to 3.1% in the 2000s. GDP fell significantly in 2009, as the effects of the global crisis hit Cyprus. It is estimated that the economy contracted by 1.0%-1.5% in 2009, compared to positive growth of 3.8% in 2008. The outlook for 2010 remains negative, with a growth forecast of barely 0.5%, below that of the EU average. Public finances also recorded a sharp deterioration in 2009, deviating considerably from the government’s earlier predictions. The government’s hopes of containing the deficit below 3.0% were dashed, as 2009 closed with the deficit running at 6.1%, from a surplus of 0.9% in 2008. The outlook for the deficit in 2010 and beyond remains uncertain, pending the outcome of the government’s ongoing efforts to contain spending and boost revenue. Total public debt grew from 48.4% in 2008 to 55.2% in 2009, and is poised to reach 60% in 2010. Amidst the turmoil, the banking sector on the island is holding up quite well, largely thanks to conservative banking practices domestically and a prudent Central Bank. Inflation was contained to 0.3% in 2009 (lowest since 1965), and unemployment shot up to 6.2% (highest since 1976 for Cyprus, although still moderate by EU standards).

Cyprus has been a successful member of the Eurozone since January 1, 2008, when it replaced the Cyprus Pound with the Euro. Joining the Eurozone was a major accomplishment for the Cypriot economy, resulting in such benefits as a higher degree of price stability, lower interest rates, reduction of currency conversion costs and exchange rate risk, and increased competition through greater price transparency. The final conversion exchange rate between the Cypriot pound and the Euro was one Euro per 0.585274 Cyprus pounds. The following website offers additional information on the mechanics of Cyprus's adoption of the Euro: http://www.euro.cy/

Investment Climate
In the run-up to EU accession (May 1, 2004), Cyprus dismantled most investment restrictions, attracting increased flows of foreign direct investment (FDI), particularly from the EU. Cyprus has good business and financial services, modern telecommunications, an educated labor force, good airline connections, a sound legal system, and a low crime rate. Cyprus' geographic location, tax incentives and modern infrastructure also make it a natural hub for companies looking to do business with the Middle East, Eastern Europe, the former Soviet Union, the European Union, and North Africa. As a result, Cyprus has developed into an important regional and international business center. According to the United Nations Conference on Trade and Development (UNCTAD) "World Investment Report 2008," Cyprus ranks among the world's leading countries per capita in terms of attracting FDI. Non-EU investors (both natural and legal persons) may now invest freely in Cyprus in most sectors, either directly or indirectly (including all types of portfolio investment in the Cyprus Stock Exchange). The only exceptions concern primarily the acquisition of property and, to a lesser extent, restrictions on investment in the sectors of tertiary education, banking, and mass media.

In 2008, the inflow of FDI (including “brass plate” companies) reached U.S. $4.0 billion. The geographic origin of this investment was 36.2% from the EU and 49.8% from non-EU countries in Europe. In terms of sectoral allocation, incoming FDI in 2008 went to the following sectors: construction 1.4%; trade and repairs 15.2%; transport and communication 5.5%; financial intermediation 48.0%; and real estate and business activities 29.7%.

The flow of U.S. investment in Cyprus reached U.S. $42.0 million in 2008, or 1.0% of Cyprus' total inward FDI. The stock of U.S. investment in the island was U.S. $434.8 million at the end of 2008. Projects involving U.S. investment in recent years have included real estate and various business activities, including a well-known U.S. coffee retailing franchise, a university, an information technology firm, an equestrian center, a hair products manufacturing unit, a firm trading in health and natural foodstuffs, an oil field products manufacturer, and a financial services company. U.S. investors may benefit from Cyprus’s abolition of EU-origin investment restrictions, provided they operate through EU subsidiaries.

Additional information on foreign direct investment can be obtained from the Cyprus Investment Promotion Agency website: http://www.cipa.org.cy.

European Union (EU)
Along with the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia, the Republic of Cyprus entered the EU on May 1, 2004. The EU acquis communautaire is suspended in the area administered by Turkish Cypriots pending a Cyprus settlement. Cyprus adopted the Euro on January 1, 2008.

Export Opportunities
Best prospects for U.S. firms generally lie in services, high-technology sectors, such as computer equipment and data processing services, financial services, environmental protection technology, medical and telecommunications equipment, desalination and water purification equipment and services, and tourism development projects such as casinos, marinas, and golf courses. Moreover, alternative energy sources and the energy sector in general, are attracting an increasing amount of attention, while the possible existence of natural gas and petroleum reserves off the southern and eastern coast of Cyprus opens up new prospects. U.S. food franchises and apparel licensors are also finding fertile ground for expansion in Cyprus.

Trade Between Cyprus and the United States
The U.S. Embassy in Nicosia sponsors a popular pavilion for American products at the annual Cyprus International State Fair and organizes other events to promote U.S. products throughout the year. The U.S. runs a significant trade surplus with Cyprus, on the order of $176.8 million in 2008 (exports of $188.5 million versus imports of $11.7 million, according to Republic of Cyprus statistics).

Principal U.S. goods exports to Cyprus include office machines and data processing equipment; electrical appliances; optical, measuring, and medical equipment; passenger cars; and edible fruit and nuts. Principal U.S. imports from Cyprus consist of dairy products, fresh fish, and mineral substances.

Bilateral business ties also encompass a healthy exchange in services. In 2008, the inflow of services (from the United States to Cyprus) was $446.0 million, against an outflow (from Cyprus to the United States) of $307.7 million, according to Republic of Cyprus statistics.

Turkish Cypriot Economy
The EU acquis communautaire has been temporarily suspended in the northern part of the island due to the unresolved political situation. The currency used is the Turkish Lira, although Euros are widely accepted. The economy of the Turkish Cypriot-administered area is dominated by the services sector including the public sector, trade, tourism, and education, with smaller agriculture and light manufacturing sectors. The economy operates on a free-market basis, although it continues to be handicapped by the political isolation of Turkish Cypriots, the lack of private and public investment, high freight costs, and shortages of skilled labor. Despite these constraints, the Turkish Cypriot economy turned in an impressive performance from 2003 to 2006, with estimated growth rates of 13.2% in 2006, 13.5% in 2005, 15.4% in 2004, and 11.4% in 2003. This growth was fueled largely by a construction boom, which ended abruptly amid renewed controversy over the legitimacy of property titles in the north, following a much-publicized court case in which the United Kingdom Court of Appeal on January 19, 2010 affirmed an earlier ruling by the European Court of Justice. In 2007, the economy grew by just 1.5%, followed by negative growth of 1.9% in 2008. Tourism and tertiary education are two very important sectors. The economy in recent years has been buoyed by the employment of around 6,000 Turkish Cypriots in the Greek Cypriot economy where wages are significantly higher, and by the relative stability of the Turkish Lira (prior to 2008). In 2008, the services sector accounted for 77.0% of GDP, industry and construction accounted for 18.0% of GDP, and agriculture 5.0%, according to Turkish Cypriot statistics. The partial lifting of travel restrictions between the two parts of the island in April 2003 has allowed movement of persons--over 16.5 million crossings to date--between the two parts of the island with no significant interethnic incidents.

Turkey remains, by far, the main trading partner of the area administered by Turkish Cypriots, supplying 68% of imports and absorbing around 58% of exports (2007 figures). In another landmark case, the European Court of Justice ruled in 1994 against the British practice of importing produce from the area based on certificates of origin and phytosanitary certificates granted by "TRNC" authorities. This decision resulted in a considerable decrease of Turkish Cypriot exports to the EU--from $36.4 million (or 66.7% of total Turkish Cypriot exports) in 1993 to $12.9 million in 2006 (or 19% of total exports). In August 2004, new EU rules allowed goods produced or substantially transformed in the area administered by Turkish Cypriots to be sold duty-free to consumers in the government-controlled area and through that area to the rest of the EU. To qualify, goods must also meet EU sanitary/phytosanitary requirements. Animal products are excluded from this arrangement. In 2005, Turkish Cypriot authorities adopted a new regulation "mirroring" the EU rules and allowing certain goods produced in the government-controlled areas to be sold in the area administered by Turkish Cypriots. (However, suppliers cannot legally transport imported products over the green line in either direction.) Despite these efforts, direct trade between the two communities remains limited (comprising only 0.09% of the Greek Cypriot community’s trade, and 11.8% of the Turkish Cypriot community’s trade in February 2009).

The EU continues to be the second-largest trading partner of the area administered by Turkish Cypriots, with a 16.0% share of total imports and 16.0% share of total exports. Total imports increased to $1.5 billion in 2007, while total exports increased to $83.7 million. Imports from the U.S. reached $16.0 million in 2007, while exports to the U.S. were nil.

Assistance from Turkey is crucial to the Turkish Cypriot economy. Under the economic protocol signed in 2006, Turkey undertook to provide Turkish Cypriots financial assistance totaling 1.875 billion New Turkish Lira (YTL--roughly $1.34 billion) over a three-year period (600 million YTL in 2007, 625 million YTL in 2008, and 650 million YTL in 2009). Turkey also provides millions of dollars annually in the form of low-interest loans mostly to Turkish entrepreneurs in support of export-oriented industrial production and tourism. The total amount of Turkish assistance to Turkish Cypriots since 1974 is estimated to be more than $4 billion.

* Section refers to the government-controlled area unless otherwise specified.

Economy*
GDP (2008): $24.96 billion.
Annual GDP real growth rate (2008): Government-controlled area 3.8%.
Per capita GDP income: Greek Cypriots (2008)--$30,744; Turkish Cypriots (2008)--$15,984.
Agriculture and natural resources (2008): 2.4% of GDP. Products--potatoes and other vegetables, citrus fruits, olives, grapes, wheat, carob seeds. Resources--pyrites, copper, asbestos, gypsum, lumber, salt, marble, clay, earth pigment.
Industry and construction (2008): 19% of GDP. Types--mining, cement, construction, utilities, manufacturing, chemicals, non-electric machinery, textiles, footwear, food, beverages, tobacco.
Services and tourism (2008): 78.6% of GDP. Trade, restaurants, and hotels 19.8%; transport 7.0%; finance, real estate, and business 28.5%; government, education, and health 19.6%; and community and other services 4.5%.
Trade (2008): Exports--$1.716 billion: citrus, grapes, wine, potatoes, pharmaceuticals, clothing, and footwear. Major markets--EU (especially Greece and the U.K.), Middle East, Russia. Imports--$10.803 billion: consumer goods, raw materials for industry, petroleum and lubricants, food and feed grains. Major suppliers--Greece, Italy, Germany, U.K. (U.S. trade surplus--for 2008: $176.8 million.)

* Section refers to the government-controlled area unless otherwise specified.

Geography of Cyprus

Government of Cyprus

Since 1974, Cyprus has been divided de facto into the government-controlled two-thirds of the island and the Turkish Cypriot-administered one-third. The Government of the Republic of Cyprus has continued to be the only internationally recognized authority; in practice, its authority extends only to the government-controlled area.

The 1960 Cypriot constitution provided for a presidential system of government with independent executive, legislative, and judicial branches, as well as a complex system of checks and balances, including a weighted power-sharing ratio designed to protect the interests of the Turkish Cypriots. The executive, for example, was headed by a Greek Cypriot president and a Turkish Cypriot vice president, elected by their respective communities for 5-year terms, and each possessing a right of veto over certain types of legislation and executive decisions. The Greek Cypriot-controlled Republic of Cyprus retains most elements of the presidential system of government expressed in the constitution, although it has cited the Turkish Cypriots' "withdrawal from government" and the "law of necessity" to enact structural changes that allow "effective governance."

Following the 1974 hostilities, the Turkish Cypriots set up their own institutions in the area they administered with an elected "president" and a "prime minister" responsible to the “National Assembly” exercising joint executive powers. In 1983, the Turkish Cypriots declared an independent "Turkish Republic of Northern Cyprus" ("TRNC"). The United States does not recognize the "TRNC," nor does any country other than Turkey.

POLITICAL CONDITIONS
Historically, none of the Greek Cypriot parties has been able to elect a president by itself or dominate the 56-seat House of Representatives. The 165,000 Greek Cypriot refugees from the area now administered by Turkish Cypriots are a potent political force, along with the independent Orthodox Church of Cyprus, which has some influence in secular as well as religious matters. In February 2008, Demetris Christofias defeated incumbent Tassos Papadopoulos and challenger Ioannis Kassoulides in two rounds of voting to become the first AKEL president of the Republic of Cyprus. All major parties hold seats in the National Council, the top advisory board to the president on Cyprus settlement issues.

Parliamentary elections last took place in May 2006. AKEL emerged the leading party, garnering 31% of votes cast, with DISY a close second with 30%; each is represented by 18 members of parliament (MPs). Other parties represented in parliament include DIKO (11 seats), EDEK (5), EUROKO (3) and the Greens (1).

Mehmet Ali Talat was elected in April 2005 as leader of the Turkish Cypriot community (as the so-called "President of the TRNC"), replacing long-time nationalist leader Rauf Denktash. Talat's political allies in the Republican Turkish Party (CTP) suffered defeat in “parliamentary” elections contested on April 19, 2009 with the formerly opposition National Unity Party (UBP), led by long-time former “Prime Minister” Dervish Eroglu, obtaining 44% of the popular vote and 26 of 50 seats in the "TRNC National Assembly.” UBP announced its “governance” program on May 11 and won an initial confidence vote on May 18, 2009.

Attempts To Achieve a Cyprus Settlement
The first UN-sponsored negotiations to develop institutional arrangements acceptable to both communities began in 1968; several sets of negotiations and other initiatives followed. In general, Turkish Cypriots focus on bizonality, security guarantees, and political equality between the two communities, envisioning a weak federation with strong powers reserved for the two constituent states. Greek Cypriots, on the other hand, emphasize the rights of movement, property, settlement, and the return of territory, and envision a stronger, more integrated federal government. Numerous UN-sponsored negotiation rounds have faltered owing to the sides’ differing aims and wants, the last major failure being the 2004 “Annan Plan,” which in simultaneous referenda in the two communities won the support of two-thirds of Turkish Cypriots but only one-fourth of Greek Cypriots.

For two years following the Annan Plan defeat, the island saw little progress toward reunification until a visiting high-level UN official in July 2006 secured the sides’ support for a framework agreement aimed at restarting settlement discussions. The sides tackled procedural issues over the ensuing 18 months but mainly avoided substance. A breakthrough of sorts occurred with the February 2008 election of Republic of Cyprus President Demetris Christofias, who immediately pledged to renew settlement efforts under UN auspices. Christofias and Turkish Cypriot leader Mehmet Ali Talat met four times between March and July 2008, with their chief negotiators and technical experts supporting their efforts via more frequent gatherings. On July 25, the two leaders announced the decision to proceed to full-fledged negotiations, which began on September 3.

Over the next 16 months, Christofias and Talat met more than 60 times, tackling the core negotiation issues of governance and power sharing, property, the economy, EU matters, security and guarantees, territorial arrangements, and migration issues. UN Secretary General Ban Ki-moon paid an official visit to Cyprus January 31-February 2, 2010. He congratulated the sides for progress to date and emphasized that courage and determination would be needed to bring the talks to a successful conclusion.

Bi-Communal Contact, Crossing Procedures
In April 2003, then-leader of the Turkish Cypriots Rauf Denktash relaxed many restrictions on individuals crossing between the two communities leading to relatively unimpeded bi-communal contact for the first time since 1974. Since the relaxation, there have been over 16.5 million buffer zone crossings in both directions. Under the current regulations, Greek Cypriots must present identity documents to cross to the area administered by Turkish Cypriots, something many are reluctant to do. They are able to drive their personal vehicles in the area administered by Turkish Cypriots, provided they first obtain a policy from a Turkish Cypriot insurance provider. Turkish Cypriots are permitted to cross into the government-controlled area upon presentation of a Turkish Cypriot ID card or other identity documentation acceptable to Republic of Cyprus authorities. They must also obtain car insurance from an insurer in the government-controlled area to drive their personal vehicles there.

Until recently, visitors choosing to arrive at non-designated airports and seaports in the area administered by Turkish Cypriots were not allowed to cross the United Nations-patrolled "green line" to the government-controlled area. In June of 2004, however, Cypriot authorities implemented new EU-related crossing regulations that allowed Americans (and citizens of most other countries) to cross freely regardless of their port of entry into Cyprus. Visitors arriving in the government-controlled area are normally able to cross the green line without hindrance, although on occasion they encounter difficulties at both the Greek Cypriot and Turkish Cypriot checkpoints. The Government of Cyprus considers ports in the area administered by Turkish Cypriots to be illegal. Policy and procedures regarding such travel are subject to change. More information on current procedures may be obtained at the UN "Buffer Zone" Ledra Palace checkpoint in Nicosia or by referral to the U.S. State Department country information sheet on Cyprus at: http://travel.state.gov/.

Principal Government Officials
President of the Republic--Demetris Christofias
Foreign Minister--Markos Kyprianou
Minister of Commerce, Industry, and Tourism--Antonis Paschalades
Minister of Finance--Charilaos Stavrakis
Minister of Interior--Neoclis Sylikiotis
Minister of Defense--Costas Papacostas
Minister of Communications and Works--Maria Nicos Nicolaides
Minister of Justice and Public Order--Kypros Chrysostomides
Minister of Health--Christos Patsalides
Ambassador to the United States--Andreas Kakouris
Permanent Representative to the United Nations--Minas Hadjimichael

Cyprus maintains an embassy in the United States at 2211 R Street NW, Washington, DC 20008 (tel. 202-462-5772) and a Consulate General in New York City. Cyprus also maintains a trade center at 13 East 40th Street, New York, NY 10016 (tel. 212-686-6016). Turkish Cypriots maintain offices in Washington (tel. 202-887-6198) and at the Republic of Turkey's Mission to the United Nations.

Government Type: Republic.
Independence: August 16, 1960.
Constitution: August 16, 1960.
Branches: Executive--president elected to 5-yr. term. Legislative--unicameral House of Representatives, members elected to 5-yr. terms. Judicial--Supreme Court; six district courts.
Administrative subdivisions: six.
Political parties: Greek Cypriot Community--Democratic Rally (right); Democratic Party (center-right); AKEL (communist); EDEK (socialist); United Democrats (center-left). Turkish Cypriot Community--National Unity (right); Democratic party (center-right); Republican Turkish (left); Communal Liberation (center-left); National Revival (center-right); Patriotic Unity Movement (left), National Justice Party (ultra-nationalist).
Suffrage: Universal at age 18.

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History of Cyprus

Cypriot culture is among the oldest in the Mediterranean. By 3700 BC, the island was well inhabited, a crossroads between East and West. The island fell successively under Assyrian, Egyptian, Persian, Greek, and Roman domination. For 800 years, beginning in 364 AD, Cyprus was ruled by Byzantium. After brief possession by King Richard I (the Lion-Hearted) of England during the Crusades, the island came under Frankish control in the late 12th century. It was ceded to the Venetian Republic in 1489 and conquered by the Ottoman Turks in 1571. The Ottomans applied the millet system to Cyprus, which allowed religious authorities to govern their own non-Muslim minorities. This system reinforced the position of the Orthodox Church and the cohesion of the ethnic Greek population. Most of the Turks who settled on the island during the 3 centuries of Ottoman rule remained when control of Cyprus--although not sovereignty--was ceded to Great Britain in 1878. Many left for Turkey during the 1920s, however. The island was annexed formally by the United Kingdom in 1914 at the outbreak of World War I and became a crown colony in 1925.

Cyprus gained its independence from the United Kingdom and established a constitutional republic in 1960, after an anti-British campaign by the Greek Cypriot EOKA (National Organization of Cypriot Fighters), a guerrilla group that desired political union, or enosis, with Greece. Archbishop Makarios, a charismatic religious and political leader, was elected president.

Shortly after the founding of the republic, serious differences arose between the two communities about the implementation and interpretation of the constitution. The Greek Cypriots argued that the complex mechanisms introduced to protect Turkish Cypriot interests were obstacles to efficient government. In November 1963, President Makarios advanced a series of constitutional amendments designed to eliminate some of these special provisions. The Turkish Cypriots opposed such changes. The confrontation prompted widespread intercommunal fighting in December 1963, after which Turkish Cypriots ceased to participate in the government. Following the outbreak of intercommunal violence, many Turkish Cypriots (and some Greek Cypriots) living in mixed villages began to move into enclaved villages or elsewhere. UN peacekeepers were deployed on the island in 1964. Following another outbreak of intercommunal violence in 1967-68, a Turkish Cypriot provisional administration was formed.

In July 1974, the military junta in Athens sponsored a coup led by extremist Greek Cypriots against the government of President Makarios, citing his alleged pro-communist leanings and his perceived abandonment of enosis. Turkey, citing the 1960 Treaty of Guarantee, intervened militarily to protect Turkish Cypriots.

In a two-stage offensive, Turkish troops took control of 38% of the island. Almost all Greek Cypriots fled south while almost all Turkish Cypriots fled north. Since the events of 1974, UN peacekeeping forces have maintained a buffer zone between the two sides. Except for occasional demonstrations or infrequent incidents between soldiers in the buffer zone, the island was free of violent conflict from 1974 until August 1996, when violent clashes led to the death of two demonstrators and escalated tension. The situation has been quiet since 1996.

People of Cyprus

Since 1974, Cyprus has been divided de facto into the government-controlled two-thirds of the island and the remaining one-third of the island, which is administered by Turkish Cypriots. Greek and Turkish Cypriots share many customs but maintain distinct identities based on religion, language, and close ties with their respective "motherlands." Greek is predominantly spoken in the south, Turkish in the north. English is widely used. Cyprus has a well-developed system of primary and secondary education. The majority of Cypriots earn their higher education at Greek, Turkish, British, and other European or American universities. Both the Greek Cypriot and Turkish Cypriot communities have developed private colleges and publicly supported universities.

Human settlement on Cyprus stretches back nearly eight millennia and by 3700 BC, the island was a crossroads between East and West. The island fell successively under Assyrian, Egyptian, Persian, Greek, and Roman domination. For 800 years, beginning in 364 AD, Cyprus was ruled by Byzantium. After brief possession by King Richard I (the Lion-Hearted) of England during the Crusades, the island came under Frankish control in the late 12th century. It was ceded to the Venetian Republic in 1489 and conquered by the Ottoman Turks in 1571. The Ottomans applied the millet system to Cyprus, which allowed religious authorities to govern their own non-Muslim minorities. This system reinforced the position of the Orthodox Church and the cohesion of the ethnic Greek population. Most of the Turks who settled on the island during the three centuries of Ottoman rule remained when control of Cyprus--although not sovereignty--was ceded to Great Britain in 1878. Many, however, left for Turkey during the 1920s. The island was annexed formally by the United Kingdom in 1914 at the outbreak of World War I and became a crown colony in 1925.

Cyprus gained its independence from the United Kingdom and established a constitutional republic in 1960, after an anti-British campaign by the Greek Cypriot EOKA (National Organization of Cypriot Fighters), a guerrilla group that desired political union, or enosis, with Greece. Archbishop Makarios, a charismatic religious and political leader, was elected president.

Shortly after the founding of the republic, serious differences arose between the two communities about the implementation and interpretation of the constitution. The Greek Cypriots argued that the complex mechanisms introduced to protect Turkish Cypriot interests were obstacles to efficient government. In November 1963, President Makarios advanced a series of constitutional amendments designed to eliminate some of these special provisions. The Turkish Cypriots opposed such changes. The confrontation prompted widespread intercommunal fighting in December 1963, after which Turkish Cypriots ceased to participate in the government. Following the outbreak of intercommunal violence, many Turkish Cypriots (and some Greek Cypriots) living in mixed villages began to move into enclaved villages or elsewhere. UN peacekeepers were deployed on the island in 1964. Following another outbreak of intercommunal violence in 1967-68, a Turkish Cypriot provisional administration was formed.

In July 1974, the military junta in Athens sponsored a coup led by extremist Greek Cypriots against the government of President Makarios, citing his alleged pro-communist leanings and his perceived abandonment of enosis. Turkey, citing the 1960 Treaty of Guarantee, intervened militarily to protect Turkish Cypriots.

In a two-stage offensive, Turkish troops took control of 38% of the island. Almost all Greek Cypriots subsequently fled south while almost all Turkish Cypriots moved to the north. Since the events of 1974, UN peacekeeping forces have maintained a buffer zone between the two sides. Except for occasional demonstrations or infrequent incidents between soldiers in the buffer zone, the island was free of violent conflict from 1974 until August 1996, when violent clashes led to the death of two demonstrators and escalated tension. The situation has been quiet since 1996.

Nationality: Noun and adjective--Cypriot(s).
Population: Government-controlled area 796,900 (end-2008 est.); area administered by Turkish Cypriots 268,011 (2007 est.).
Annual population growth rate: Government-controlled area 1.0% (2008 est.); area administered by Turkish Cypriots 4.1% (2007 est.).
Ethnic groups (1960 census): Greek (77%), Turkish (18%), Maronite and Armenian (1%), and other (4%).
Religions: Greek Orthodox, Muslim, Maronite, Roman Catholic, Armenian Orthodox.
Languages: Greek, Turkish, English.
Education: Years compulsory--6 in elementary; 3 in high school. Attendance--almost 100%. Literacy--about 99%.
Health: Infant mortality rate--7.04/1,000. Life expectancy--77 yrs.; males 75 yrs.; females 80 years.
Work force: Government-controlled area (2008), 379,100: agriculture and mining--7.5%; industry and construction--20.4%; and services--72.1%. Turkish Cypriot-administered area (2007), 89,787: agriculture and mining--3.6%; industry and construction--20.5%; and services--75.9%.