VZCZCXRO9717
RR RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSR
DE RUEHNC #0981/01 3531432
ZNY CCCCC ZZH
R 181432Z DEC 08
FM AMEMBASSY NICOSIA
TO RUEHC/SECSTATE WASHDC 9427
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBS/USEU BRUSSELS
RUCNDT/USMISSION USUN NEW YORK 1283
RUEAIIA/CIA WASHDC

C O N F I D E N T I A L SECTION 01 OF 02 NICOSIA 000981 
 
SIPDIS 
 
DEPT FOR EUR/SE 
 
E.O. 12958: DECL: 12/18/2018 
TAGS: PREL PGOV TR CY
SUBJECT: CYPRUS: TURKISH AMBASSADOR'S INTERVIEW HARBINGER 
OF EARLY ELECTIONS? 
 
REF: A. NICOSIA 558 
     ¶B. NICOSIA 650 
     ¶C. NICOSIA 929 
 
Classified By: Classified by DCM Jonathan Cohen for reasons 1.4b and 1. 
4d 
 
¶1. (C) Summary:  Departing Turkish "Ambassador to the TRNC" 
Turkekul Kurttekin's call for Turkish Cypriot (T/C) economic 
and structural reform may in fact be a harbinger of early 
"parliamentary" elections in 2009 (they are scheduled for 
2010.)  In two interviews, Kurttekin criticized the Turkish 
Republican Party (CTP)-led "government" for its inability to 
shrink a bloated, inefficient public sector and adopt 
market-driven mechanisms.  His sharp call for reform embodies 
well-known Turkish positions that hitherto had been delivered 
largely through official channels, not public Q-and-As. 
Further, it seemed a clear response to repeated entreaties by 
the nearly bankrupt CTP "government" for extraordinary 
budgetary support, sans reform, beyond Turkey's 400 million 
USD annual aid package.  The extent to which Turkey provides 
short-term assistance will likely determine the outcome of 
possible early elections. End Summary 
 
----------------------------- 
"The rudder is in your hands" 
----------------------------- 
 
¶2. (U) Turkish Ambassador Turkekul Kurttekin provided an 
unvarnished critique of the shortcomings of the Turkish 
Cypriot "administration" and economy in two lengthy 
interviews he gave to the mass circulation daily "Kibris" and 
the Turkish Cypriot (T/C) wire service TAK on December 12 and 
15, respectively.  Kurttekin's cri de coeur slammed the 
CTP-led "government" for its inability to reform the bloated, 
inefficient "state" apparatus.  Nearly 82 percent of the 
draft 2009 budget would be spent on salaries and social 
transfers, he asserted, while just five percent was allocated 
for capital expenditures.  Kurttekin urged the "government" 
to use Turkey,s three-year, 1.2 billion USD aid protocol 
wisely and efficiently (the protocol, signed in 2006, 
finances roughly 25 percent of the 2009 "TRNC" budget.)  He 
claimed that ultimately, the "rudder" to reform was in the 
hands of the Turkish Cypriots. 
 
------------------------------------------- 
"Don,t fixate on a solution over economics" 
------------------------------------------- 
 
¶3. (U) Kurttekin admonished the Turkish Cypriots not to 
"fixate too much on a solution (to the division of the 
island);" rather, they should first eliminate institutional 
shortcomings and economic deficiencies to "govern" themselves 
properly in the post-solution "new partnership."  Kurttekin 
pointed out that both Turkey and the world had changed in the 
25 years since the 1983 founding of the "TRNC," and the T/Cs 
had to act accordingly.  Highlights of his two interviews 
included the following points: 
 
-- "Parliament" needs to work overtime to fix serious 
shortcomings in public institutions; 
-- The "government" has not taken a single step in line with 
the 2006 World Bank reform report; 
-- Massive "state" transfer payments hinder market principles 
and stifle entrepreneurship; 
-- Turkey will continue to help but cannot do everything. 
The reform effort has to be a       Turkish Cypriot one. 
-- Authorities need to convince all sectors of the need for 
sacrifice. 
 
¶4. (U) Press coverage was largely positive, with only one 
prominent columnist critical of Kurttekin's reform 
prescription.  Hasan Kahvecioglu, in the center-right daily 
"Halkin Sesi," said that Ambassador Kurttekin was "insightful 
and positive," while "Kibris's" Hasan Hasturer wrote that he 
would leave "positive footprints."  Only Ali Baturay, also 
writing in "Kibris," took the Ambassador to task for 
minimizing Ankara's role in creating the present mess. 
Baturay said that those in power in the north merely 
distributed Turkey's money to stay in power. 
 
--------------------------------------------- -- 
"Ankara Putting Pressure to do the right thing" 
--------------------------------------------- -- 
 
¶5. (C) Kurttekin's public pronouncement tracks with what 
Turkish "Embassy" officials have been privately telling us 
 
NICOSIA 00000981  002 OF 002 
 
 
and T/C officials.  In a November 7 lunch with Ambassador 
Urbancic, Kurttekin said Ankara was "putting on pressure (to 
the 'TRNC') to do the right thing," noting that the 2006 
World Bank report mentioned above was the proper "diagnosis" 
of the problem.  The CTP "government," he said, had covered 
some ground, but simply wasn't doing enough to combat the 
"TRNC's" many ills. 
 
¶6. (C) The teetering CTP "government" has indeed been 
unwilling to slash spending -- Ankara's demand before it 
would discuss providing extraordinary budget support to the 
Turkish Cypriots (Refs A and B).  First on Turkey's chopping 
block are two T/C sacred cows:  generous COLA payments, and 
the so-called "13th month salary," a holiday bonus paid at 
the end of the year.  In a November 21 lunch with Ambassador 
Urbancic (Ref C), "PM" Ferdi Sabit Soyer said that he might 
be forced to call early elections in mid-2009 as a result of 
Ankara having rejected a 100 million USD loan request, from 
which he hoped to pay salaries.  (Note: Soyer on December 16 
again touted the possibility of a loan from Turkey, this time 
to be utilized for private sector stimulus.)  CTP's number 
two, Omer Kalyoncu, told us on December 3 that Turkey was 
still blocking a request to transfer Turkish assistance 
allocated for infrastructure improvements to pay for the 13th 
salary.  A "TRNC" spokesman announced on December 16, 
however, that the holiday bonus would indeed be paid. 
 
--------------------------------------- 
Interview Harbinger of Early Elections? 
--------------------------------------- 
 
¶7. (C) Asim Akansoy (please protect), Talat's chief of staff, 
told us on December 15 that Kurttekin sought to weaken the 
present CTP government.  His interviews were a clear message 
from Turkish Deputy PM Cemil Cicek, no friend of the Turkish 
Cypriots and feared to be sympathetic to the main opposition, 
the separatist National Action Party (UBP).  That said, 
Akansoy admitted that all in AKP, including Turkish PM 
Erdogan, were serious about economic reform in northern 
Cyprus.  Even "TRNC President" Mehmet Ali Talat found 
Kurttekin's comments valid, he added.  Levent Eler, number 
three at the Turkish "Embassy," told Embassy officers on 
December 4 (before the Kurttekin interviews) that Turkey 
stood by its position of "no blank checks" for the "TRNC," 
noting that early elections might in fact be in the offing. 
A new "government," he believed, would have the mandate to 
conduct serious structural and economic reforms. 
 
¶8. (C) Akansoy earlier had predicted early elections in a 
December 3 meeting with us, arguing that the pro-solution CTP 
could renew its electoral mandate provided it got a new dose 
of Turkish aid.  This projection approximates a scheme that 
"PM" Soyer outlined to us (Ref C) in November, whereby he 
would try to secure all 2009 Turkish aid upfront in order to 
keep the "state" apparatus running in the short term (and in 
so doing burnish his party's chances in early elections.) 
Kalyoncu also hinted at early elections coming after CTP's 
March 2009 congress.  Necdet Ergun, a leading economist with 
close ties to both Talat and the business community, told 
Embassy officers on December 2 that Ankara might indeed front 
some money to the present "government," but was unsure if the 
amount would be decisive. 
 
------- 
Comment 
------- 
 
¶9. (C)  Kurttekin was on target regarding "governance" and 
economic shortcomings in the north.  The positive press 
coverage the interviews received indicates not only the 
accuracy of his observations, but the extent of public 
frustration with the administratively inept CTP-led 
"government."  Turkey clearly wants economic reform.  Its 
refusal to bail out the CTP may be an attempt to achieve it 
through early elections and a new "administration."  Should 
the opposition UBP come to power, Talat would still run the 
negotiations as "TRNC President" and T/C leader, at least 
until his term expires in April 2010.  Ankara might in fact 
use UBP in a "good cop, bad cop" routine with Talat to wring 
greater concessions out of the Greek Cypriots.  We have 
doubts, however, whether a UBP-led "government" in the north 
would enjoy greater success than CTP in trimming the bloated 
"state" bureaucracy.  End Comment. 
Urbancic