In Defense of Cyprus

BERLIN – Greece is said not to have one. Cyprus does, but needs to change it. Luxembourg’s is similar to Cyprus’s, but apparently it is just fine. Malta’s, however, requires more thought. I am, of course, referring to countries’ “business model,” which all sovereign states have lately been deemed to have. Germany, for example, is supposedly an export country.

In addition to Cyprus’s close ties to Greece and Russia, rooted in their shared Orthodox tradition, it has an important historical connection to the United Kingdom, owing to the lasting cultural impact of British colonial rule from 1925 until 1960. For example, English remains the language of education and the lingua franca in Cyprus, and key institutions were modeled on those in the UK.

Cyprus spends 7% of its GDP on education, the third-highest share in the European Union. Many Cypriots attend universities in the UK or North America, with almost four of five students studying abroad. And 47% of Cypriots have a university education, the highest level in the EU.

Such a well-educated and mobile population is essential to Cyprus’s business model, in which high-value accountancy, banking, and legal services compensate for the country’s lack of agriculture and heavy industry. The free movement of payments, capital, and services associated with EU membership afforded Cyprus additional advantages. Add low taxes and a double-taxation convention with Russia, and it is no surprise that Cyprus’s business model –serving as an international center for services and trade – has been successful.