$Unique_ID{COW01031} $Pretitle{222} $Title{Cyprus Chapter 3D. Foreign Trade and Balance of Payments} $Subtitle{} $Author{Donald P. Whitaker} $Affiliation{HQ, Department of the Army} $Subject{percent million turkish cyprus exports cypriot imports government trade pounds} $Date{1979} $Log{Radio Anouncer*0103102.scf Computer Training*0103103.scf } Country: Cyprus Book: Cyprus, A Country Study Author: Donald P. Whitaker Affiliation: HQ, Department of the Army Date: 1979 Chapter 3D. Foreign Trade and Balance of Payments Foreign Trade At the time of the Turkish intervention Cyprus foreign trade was overwhelmingly oriented toward the West. In the early 1970s Britain and the other members of the European Economic Community (EEC-also called the Common Market) annually purchased 60 to 70 percent of the island's exports and supplied some 55 to 60 percent of its imports. Greece and Spain were also important trading partners in Western Europe-Greece mainly as a source of imports and Spain as a buyer of Cypriot products-and the United States accounted for some 6 percent of imports although it purchased very few of Cyprus exports. The East European trading area consisting of the Soviet Union and the other socialist states of the Council for Mutual Economic Aid (COMECON) furnished 10 to 15 percent of imports and bought close to 7 percent of exports. In contrast, trade with the neighboring Arab states of the Middle East and North Africa was only moderate. Imports-mainly from Lebanon and Egypt-were relatively minor, although exports to the area had risen to about 6 percent of total exports in the early 1970s (see table 15, Appendix A). Britain's entry into the EEC in January 1973 was followed more or less of necessity on the part of Cyprus by the establishment of an association between Cyprus and the EEC in June. An agreement was also reached for a two-step advance to full membership and a customs union, the first stage to end in mid-1977 and the second five years later. The EEC granted Cyprus important concessions on exports of manufactures, of particular significance to development of the island's manufacturing sector, but lesser concessions were made for food exports, an area in which existing competition was greater. However, the most important arrangement was for Cyprus exports to retain their Commonwealth preferential tariff treatment during the initial period, including agricultural exports of which Britain regularly took about 75 percent. In 1977 this initial stage was extended until the end of 1979, partly because of the effects of the Turkish intervention, but Cyprus lost its Commonwealth preference and has had to negotiate annual agreements with the EEC on its British market. In mid-1979 discussions were under way in Nicosia between the EEC and Cyprus on the start of the second phase of the association agreement. The economic relations that developed with Britain during the colonial era were a major determining factor in trade patterns. Irrigated early vegetable exports, a principal earner of foreign exchange in the late 1970s, were promoted by British colonial authorities in large part to furnish the British market with produce at a time of year when domestic production did not meet demand. The British also promoted the development of fortified wines, chiefly sherry, specifically produced for the British market. As a result, during the 1960s two-fifths of the island's exports, including over three-quarters of its agricultural products, went to Britain, a proportion that continued in 1973. Britain also furnished about one-third of imports in the 1960s, but the total had declined to one-fourth in the early 1970s. The de facto division of the island had a major impact on foreign trade in the south. Over 50 percent of agricultural exports (which had accounted for about half of total exports) had originated in the north. Although modernization and extension of agriculture offered some possibilities, the most feasible solution to this loss was considered to be the promotion of manufacturing exports, which was favored by Cyprus' geographic position, the large amount of skilled refugee labor, trained entrepreneurial and managerial personnel, and comparatively low labor costs. The items producible, however, including clothing, footwear, cement, building materials, plastics, and packaging materials, faced strong competition in Europe. Exporters therefore turned to the Arab states for markets. The effort was so successful that in 1976 these states took 46.5 percent of all exports (compared to 33.1 percent by the EEC including Britain, which remained Cyprus' most important trading partner), 47.8 percent in 1977, and 46.7 percent in 1978. The principal new markets were Saudi Arabia, Kuwait, and the states of the Persian Gulf; Lebanon and Egypt remained important buyers. Imports continued to come principally from Western Europe in the late 1970s, with the EEC accounting for better than 46 percent of the total. Britain remained the largest single supplier furnishing 22.1 percent of imports in 1978 while other members of the EEC combined provided another 28.7 percent. There were reports that although Britain more than welcomed Cyprus trade some discontent existed because of the relative trade balance disparity between imports by Britain and those by other EEC members compared to their exports to the south. In 1977 Britain took almost 29 percent of the island's exports. The total dropped to 23.3 percent in 1978, whereas the rest of the EEC took only 5.4 percent in 1977. About one-quarter of the imports by value into the Greek Cypriot area consisted of consumer goods. Raw materials accounted for some two-fifths and capital goods under one-fifth (unusual purchases of civil aircraft raised the capital goods to almost 21 percent in 1978). Fuels and lubricants, chiefly for industrial purposes, accounted in value for 11 percent of 1978 imports. In 1975, the first year after the de facto division of the island, the Turkish Cypriot area imported goods valued at close to TL450 million. The total increased steadily thereafter through 1978 when imports reached TL2,071 million. Manufactured goods accounted for the largest share of imports constituting about 35 percent of the total in 1977 and 1978. Machinery and transport vehicles were in second place and foodstuffs third. Initially the area's principal supplier had been Turkey, which furnished 64 percent of imports in 1975, but that country's share had declined to some 39 percent in 1978. The second most important supplier was Britain, which increased its share in the north's imports from 12 percent in 1975 to 24 percent in 1978. Members of the EEC, excluding Britain, provided over 19 percent that same year. The remaining imports came from some forty other countries located in all parts of the world. Exports from the north amounted in value to TL151.4 million in 1975. Turkey took 44 percent, Britain 33 percent, and the other members of the EEC under 14 percent. During the next three years the export trade increased relatively in value at about the same rate as imports approximately quintupling to TL744 million in 1978. Britain's share doubled during this time to over 65 percent in 1978, making that country the north's principal trading partner, and Turkey second with 20 percent. Exports to the EEC varied greatly reaching a high of over 33 percent in 1976 but dropping to only 3 percent in 1978. Agricultural products were the principal exports, major items including citrus, potatoes, and carobs; foodstuffs, live animals, beverages, and tobacco accounted for almost 87 percent of total exports in 1978. Balance of Payments Cyprus' trade balance has been consistently unfavorable since before independence. However, through 1967, invisible receipts-consisting of regular, substantial transfers from Britain covering the expenditures of troops and other British personnel located on the British bases, expenditures by the Greek and Turkish units stationed on Cyprus, UN troop expenditures (after March 1964), assistance by Turkey to Turkish Cypriots, remittances from Cypriots abroad, and the then relatively small net receipts from tourism and other miscellaneous services-resulted in a positive current account balance. From 1968 to 1973 merchandise imports grew at a faster pace than exports as consumption increased stimulated by an expanding economy and boom conditions. Although increases in export prices and an appreciation in value of the Cyprus pound occurred at the same time, they did not offset growing import outlays, which far exceeded export receipts. In 1973 this situation was worsened by a general rise in world prices of food at a time when Cyprus had to increase purchases to meet shortages resulting from two years of drought and by the large increase in world petroleum prices. The 1973 trade deficit of 83.3 million [C] Pounds was one and a half times merchandise receipts, and the current account balance, which had been in deficit since 1968 despite rising receipts from a rapidly expanding tourism sector, increased expenditures by the British bases, and growing remittances from abroad, recorded a record deficit (see table 16, Appendix A). Capital inflow after independence was very moderate but at a rate sufficient to maintain the overall balance of payments in the black through 1972 as well as to permit a buildup of foreign reserves, which in 1972 reached over 121 million [C] Pounds, the cost of eleven months' imports. In 1973, however, although capital inflow grew by 34.5 percent over the preceding year, it failed to counterbalance the current account deficit, and Cyprus experienced its first overall balance-of-payments deficit after independence. Most of the inflow during this time was private, principally from Britain. Official borrowing abroad was generally small, reflecting in part the high rate of domestic savings, in part the hesitancy of foreign commercial sources to provide financing under the unsettled political conditions existing after 1963, and in part, for whatever reasons, the disinterest of potential government loan sources. The Turkish intervention had a major effect on the balance of payments. From mid-1974 in the Greek Cypriot area both imports and exports declined, the latter greatly affected by the loss of production facilities in the northern zone. Tourist earnings dropped drastically, and private capital inflow practically halted. Substantial budgeting assistance from Greece began in 1974, and grants through the UN increased, but the overall balance of payments recorded a large deficit, and foreign exchange reserves were drawn down to 103.9 million [C] Pounds. In 1975 imports continued at a comparatively low level. The unfavorable trade balance was reduced, but invisibles, especially in the form of tourist earnings, also dropped. Capital inflow was negligible, and a large deficit in the balance of payments was again registered. Foreign exchange reserves declined further to 89 million [C] Pounds. A turnaround occurred in 1976 as industry revived, unusually favorable conditions developed for agricultural exports, and the export market expanded in the Arab world. Remittances from Greek Cypriots working on contract abroad, substantial improvement in tourism, continued high international aid for displaced persons, and renewed capital inflow also occurred; and the balance of payments was again positive. In 1977 aggregate domestic demand grew rapidly, and capital goods, consumer goods, and raw material imports in money terms increased at a much higher rate than exports. Invisible receipts were far short of meeting the record negative trade balance. The shortfall was covered in part by a substantial increase in private capital inflow as investors sought to share in a booming economy. The remainder was covered by mainly long-term foreign borrowing including a substantial loan floated on the Eurocurrency market. At the end of the year exchange reserves stood at 135.1 million [C] Pounds, equivalent to approximately six months' imports of goods and services at then-current prices. In 1978 a much higher unfavorable trade balance was reported as smaller exports of agricultural products, potatoes in particular, occurred, and further increases in imports were registered, including raw materials, capital equipment, and notably consumer goods. Invisibles increased as tourism picked up, but a large current account deficit of close to 60 million [C] Pounds was reported provisionally. The overall payments position was aided, however, by increased capital inflows, especially of long-term private loans. Foreign exchange reserves at the end of 1978 were reported at 140.5 million [C] Pounds. Little information has appeared on the balance-of-payments position of the Turkish Cypriot area. Foreign trade deficits were reported for 1975, 1976, and 1977 of TL298.3 million, TL800.4 million, and TL1,057.1 million respectively, and the deficit for 1978 reached TL1,327.1 million. In late 1978 tariffs on certain items were raised, and the importation of other goods was banned in an effort to reduce the trade deficit. The number of tourists almost doubled between 1976 and 1978, from 63,219 to 112,910-in 1978 some 93 percent were from Turkey-increasing invisible receipts. The arrangements for local supplies for Turkish troops stationed in the north were unknown, but conceivably some earnings would accrue to the economy, and substantial expenditures for refugees were made by the United Nations High Commissioner for Refugees (UNHCR)-estimated by Turkish Cypriot sources as TL69.6 million for 1979. Capital inflow appeared to be almost entirely from Turkey, although some investment may be coming from other sources, e.g., the establishment of two private international air lines in early 1979 (see Civil Aviation, this ch.). Turkey has furnished substantial budget support, providing most, if not all, funds for the Turkish Cypriot development budget, in 1977 amounting to TL420 million, and other budget support estimated at TL451 million. Budget support for 1979 was expected to be TL378 million; projected other foreign capital inflow totaled TL757.5 million, but specific sources were not given. External Debt and Aid Until 1974 domestic savings had met much of the investment requirements of the economy, and external borrowing had been limited. At the end of 1973 the outstanding external public debt repayable in foreign currency amounted to only US $83.3 million of which US $57.3 million, equivalent to 5.8 percent of 1973 GNP, had been disbursed. The debt service of US $8.3 million was equal to 0.8 percent of GNP and 1.9 percent of the export value of goods and nonfactor services that year. Multilateral (World Bank) loans constituted more than half of disbursed funds, and bilateral loans, furnished almost entirely by Britain and West Germany, made up 17 percent. The remainder were owed to private suppliers and financial institutions in Britain, Malta, Switzerland, and several other Western states. At the end of 1977 outstanding loans in the Greek Cypriot area totaled US $215.2 million of which US $162.3 million had been disbursed. In 1977 debt service amounted to US $15.6 million, 1.5 percent of GNP but still a comparatively low estimated 3 percent of exports of goods and nonfactor services. The sources of funds widened somewhat after mid-1974 as loans were obtained from Czechoslovakia, France, Greece, and the Kuwait Development Fund. Three loans (one in 1977 and two in 1978) were also successfully floated on the Eurocurrency market, two syndicated by Chase Manhattan Bank of the United States and one by the Bank of America. Possibilities for substantial further loans from bilateral and multilateral sources appeared limited in mid-1978, at least so long as the political situation remained uncertain, and greater reliance on commercial bank loans and suppliers credits seemed likely. Between mid-1974 and early 1979 the equivalent of more than US $210 million in grant aid was given for assistance to refugees and displaced persons by governments, voluntary agencies, and private contributors. Over two-thirds of this aid was made available through the UNHCR and was distributed both in the Greek Cypriot and the Turkish Cypriot areas in amounts based on the approximate population of each. The largest single contributor was the United States government, which provided over US $100 million. The EEC furnished the equivalent of about US $16.5 million, and some thirty other countries gave US $24 million. Voluntary agencies, Greek Orthodox Church groups, and private Greek contributions accounted for over US $70 million additional. During the 1974-78 period grant aid by the Greek government to the government of the republic for other than refugee assistance amounted to the equivalent of about US $120 million (an additional US $27 million was anticipated in 1979). The Turkish government was estimated to have furnished the equivalent of about US $125 million to the Turkish Cypriot administration. Public Finance Until 1969, in an expanding economy characterized by a dynamic private sector, the government had taken a generally passive attitude with respect to fiscal action. Budgetary goals included the generation of savings for investment in economic development-which obviated to a large extent the need for foreign borrowing, difficult to arrange because of the unsettled political atmosphere in Cyprus-and the maintenance of price stability. The budget, which regularly showed a surplus through 1967, consisted of three accounts-that of the government, which was further divided into ordinary and development budgets, that of the Social Insurance Fund (SIF), and that of the Loan Commissioners. In 1968 a small deficit was experienced. This was followed by a larger one in 1969, and deficits occurred annually thereafter. Fiscal measures were initiated in 1969 intended to dampen a rapid growth in demand. At the same time, however, budgetary expenditure grew faster than government revenue, led by larger outlays on education, health, and other social services, as well as by higher development expenditure as the government actively began to complement private efforts through projects to expand agriculture, infrastructure, and tourism. In 1973 the increase in expenditure was further enlarged by the need to provide substantial emergency aid to farmers stricken by the island's worst drought in many years, and in 1973 the deficit reached 12.3 million [C] Pounds, equivalent to 4 percent of GDP. The disruption of the economy in mid-1974 and the great need for aid for displaced persons placed heavy new demands on expenditure, at a time when ordinary revenue suffered a serious decline. The situation was alleviated somewhat by foreign grants, which accounted for 19.5 percent of government receipts in 1975 and in 1976. In 1977 grants rose to 22.9 percent of receipts, and the situation was further improved by greatly increased ordinary revenue from a newly buoyant economy; the deficit dropped to 2.5 percent of GDP from a high of 9.5 percent in 1975 (see table 17; table 18, Appendix A). Little detail existed on the budget of the Turkish Cypriot administration. The draft budget for 1979 was reported to be TL2.3 billion (the 1978 budget had been reported at TL1.5 billion), equivalent at exchange rates relative to the United States dollar in the first quarter of 1979 to 32.9 million [C] Pounds. This compared with the 1979 budget total of the Greek Cypriot area of 147.4 million [C] Pounds. Current expenditure was set at TL1.2 billion (17.6 million [C] Pounds against 115 million [C] Pounds-including an expected surplus of 18 million [C] Pounds-in the south), and TL457.1 million (6.5 million [C] Pounds) was allocated for investment, against 32.4 million [C] Pounds in the government area. Domestic revenue in the Turkish Cypriot zone was to provide TL1.12 billion (15.9 million [C] Pounds) and grants from Turkey TL378 million (5.9 million [C] Pounds). The north expected to secure other foreign aid equivalent to TL757.5 million (10.7 million [C] Pounds), but the sources of this aid were not given. The 1979 budget included a projected deficit of about TL75 million (the 1978 budget had included a deficit of TL300 million). Information on actual performance in 1978 was unavailable in mid-1979. Employment, Wages, and Prices [See Radio Anouncer: Courtesy Embassy of Cyprus, Washington DC] [See Computer Training: Courtesy Embassy of Cyprus, Washington DC] In 1973 some 254,700 people were gainfully employed in the republic, constituting 91 percent of the population classified as economically active (see table 19, Appendix A). Unemployment was minimal at 1.2 percent. Agriculture accounted for 37 percent of individuals engaged in gainful work, government and private services 20.5 percent, and manufacturing 15 percent. A fast growing construction sector employed another 11.2 percent. Information on the sectoral distribution of employment at the time in different areas of the island appears not to have been published. Of those persons gainfully employed at the end of 1973, some 37.5 percent (95,627) were members of labor unions. Almost 46 percent of total union members belonged to unions commonly referred to as the Old Trade Unions that were grouped in the Pan-Cyprian Federation of Labor (Pankyprios Ergatiki Omospondia-PEO). The PEO was affiliated internationally to the left-oriented World Federation of Trade Unions (WFTU) and in Cyprus was dominated by the Progressive Party of the Working People (Anorthotikon Komma Ergazomenou Laou-AKEL), which was Cyprus' communist party (see The Church and the Communists in Opposition, ch. 4). About 32 percent of union members belonged to the so-called New Trade Unions, which were joined in the Cyprus Confederation of Labor (Synomospondia Ergaton Kyprou-SEK). SEK was classified as right wing and was affiliated to the International Confederation of Free Trade Unions (ICFTU). Turkish Cypriot workers were in separate unions having in 1973 a total of 8,861 members, or about 7 percent of the unionized work force. Most remaining union members were in a group of miscellaneous unions including a number composed of personnel in government services. The mass movement of refugees and displaced persons after the Turkish intervention resulted in a major geographic rearrangement of the economically active population, and the accompanying disruption of the economies of the northern and southern areas brought large-scale unemployment to both. Little detail on the situation subsequent to mid-1974 in the Turkish Cypriot zone had appeared by mid-1979. Shortages of personnel were reported in the manufacturing sector in that region of the island. Erosion of the labor force was said to be taking place through emigration and recruitment for jobs abroad-more than 1,000 Turkish Cypriots were reported to be working for one corporation alone in Libya in 1978. At the same time, unemployment apparently continued to be a significant problem, according to Turkish Cypriot political and union leaders. Statistics published by the northern administration showed the total of registered unemployed workers at 1,776 at the end of 1977 and at 2,464 at the end of 1978, with a high of 3,400 recorded in October 1978; how many nonregistered unemployed there were could not be determined. The rate of unemployment also could not be determined owing to a lack of information on the size of the work force; nor was information found on sectoral distribution of the work force. In the Greek Cypriot area the economically active population was estimated at 207,700 in 1975, of whom about 70 percent were gainfully employed in the domestic economy. Overall unemployment, which had reached a high of 29.6 percent during the latter part of 1974, declined to a monthly average of 16.1 percent during 1975 (registered unemployment averaged 10.9 percent). Basic detail for 1975, the first full year after the intervention against which subsequent data could be compared, showed that among the gainfully employed some 31 percent were in agriculture, over 24 percent were in government and private services, and manufacturing employed over 17 percent. By 1977 government and private efforts to revive and expand the south's economy had increased the number gainfully employed to 81.5 percent and in 1978 to 84 percent of a somewhat smaller economically active population (reduced mainly by emigration). The development emphasis on manufacturing was evidenced by that sector's employment of over 20 percent of those persons gainfully working and a decline in agriculture to some 28 percent of the total. Steadily growing construction activities had also increased the number working in that industry to 9 percent of the total compared with some 6 percent in 1975. Unemployment declined to a monthly average of only 3 percent, although it should be noted that 13,500 persons, or 7 percent of the economically active population were temporarily working abroad. About half of these workers were in Greece; most of the remainder were employed under private-firm contracts in a number of Arab states; and some also worked in Bulgaria and Czechoslovakia under labor agreements arranged by the Cyprus government. In 1978 domestic unemployment declined further to about 2 percent of the economically active population, and shortages of labor occurred in construction and manufacturing, despite some reported slackening in the rate of economic expansion during the year. An estimated 6 to 7 percent of the work force continued to work abroad. At the beginning of the 1970s wages were growing at an average annual rate of about 12 percent. As the 1970s progressed, boom conditions and a tightening labor market brought larger wage demands, and in 1973 the average pay raise was 18.6 percent-led by increases of 23.2 and 22.4 percent respectively for municipal and construction workers. In real terms, the average increase registered a gain of 10.5 percent. Wage contracts negotiated in 1974 mainly before the Turkish intervention pushed nominal wages up 13.1 percent for the year. After mid-year the standard practice of indexing wages to the cost of living was temporarily suspended in the government-controlled area, as were various allowances and bonuses; the demand for labor also dropped precipitously in some economic sectors. As a result, real wages registered a decline of 3.2 percent, which was followed in 1975 by a 2.2-percent increase in nominal wages but a further drop of 1.3 percent in real wages. Improving economic conditions in the south in 1976 again brought advances in wages; however, the average increase for the year was quite moderate at under 8 percent. In light of the situation, wage demand restraint was voluntarily exercised by the unions, and the highest average gain was slightly over 13 percent recorded by the trade sector. Developing shortages of labor in 1977 were a significant factor in new wage contracts. The resumption in mid-1977 of wage and salary adjustments on the basis of rises in the retail cost-of-living index and the restoration of suspended bonuses and allowances contained in various contracts again added to overall wage rates, and an average pay increase of roughly 20 percent occurred. The largest increases-as indicated by the October 1977 rate-of-pay index-were 26 percent in government, 23 percent in manufacturing and construction, and 21 and 20 percent respectively in the services and trade sectors. Union membership increased substantially between 1974 and 1977 both in absolute numbers and relative to the gainfully employed population in the south. At the end of 1977 more than 62 percent (103,093) of all individuals working for wages in the south's economy were union members; two-thirds of the total were men and one-third women. PEO unions constituted not quite one-half of organized workers, and SEK accounted for approximately one-third additional. About 150 collective bargaining agreements between employers and the unions were due for renegotiation at the end of 1978. Employers claimed that large wage increase demands, including raises ranging between 30 and 50 percent, had been made. However, union leaders stated that as in past negotiations, reasonable restraint would be exercised. In late 1978 an agreement was reached between the government and the Public Servants Union on a 13-percent increase. However, this was to be in three stages, with the first increase of 3 percent to start January 1, 1979, a second of 4 percent on August 1, and the third of 6 percent to begin April 1, 1980. Information on increases in other sectors remained unavailable in mid-1979. Women were paid substantially less than men in all occupations-the mean monthly rate of pay in October 1977, for instance, for all wages and salaries was 141 [C] Pounds for men and 76 [C] Pounds for women. The great difference in pay rates was related in part to the kind of work and to such factors as job levels, percentage of manual work, and educational background. To some extent, however, it was also due to the force of tradition whereby women were regularly paid at lower rates. Before the Turkish intervention prices had exhibited a notable degree of stability. Between 1967, when the Cyprus pound was devalued, and 1972 the average annual increase in retail prices was under 3.3 percent. In 1973 they rose by 7.7 percent influenced to a considerable extent by external factors including the substantial increase in world food prices, as well as the effects of the domestic drought. The large-scale rise in the price of oil in late 1973 added to upward pressures, and during the first six months of 1974 prices rose an average of 13.7 percent. The events of mid-1974 resulted in an abnormal situation, and the government retail price index was discontinued; however, it has been estimated by international agencies that over the year consumer prices rose on an average between 16 and 20 percent. The sharp drop in incomes and aggregate demand after mid-1974 in the Greek Cypriot area acted as a brake on inflationary forces, and in 1975 consumer prices showed an average rise of only about 4 percent, despite expansionary monetary policies and the economic disruption. In 1976 the increase again was only about 4 percent, but growing demand, rising labor costs, and the increased cost of imports raised retail prices an average of more than 7 percent in 1977 and again in 1978. From at least 1977 in the Turkish Cypriot area strikes had occurred or threats to strike had been made by labor unions seeking adjustment of wages and action by the government to hold down or freeze prices. Available reports indicated that the labor union movement was strong and that workers in many if not most areas of industry, including the Public Economic Enterprises, as well as workers in other activities were organized into labor unions. The largest workers' organization was the Turkish Cypriot Labor Federation (Turk-Sen), which grouped together an unknown number of these unions. Particularly active was the Turkish Cypriot Public Servants Union, which in late 1978 demanded, in addition to a revision of wages at the beginning of 1979, the freezing of prices and establishment of a realistic cost-of-living allowance. Demands were also made that pay revisions take into account devaluations of the Turkish lira. (The salaries of government officials continued to be pegged to the Cyprus pound but were actually paid in Turkish lira, which were still calculated at the predevaluation rate. Failure to make adjustments had in effect reduced real income considerably.) During early 1979 the union was offered a 40-percent pay increase against its demand for a 51-percent rise. The offer was rejected, and union members went on strike at various state enterprises beginning in mid-April. A new collective agreement was signed at the end of April, but settlement details were unavailable. Price increases in the Turkish Cypriot zone have far exceeded those in the government area. The cost-of-living index for goods and services rose by 22.2 percent between February and December 1977. Devaluation of the Turkish lira in January 1978 presumably increased the upward pressure on prices, which advanced by over 40 percent during the year to stand at 63.1 percent above the February 1977 level at the end of December 1978. During the roughly two-year period the cost of education increased more than 119 percent, medicines and medical services by almost 80 percent, clothing by over 77 percent, and foods and beverages by close to 61 percent. The lowest rate of increase was in expenditures for housing, which grew by slightly more than 41 percent. In January 1979 a Turkish radiobroadcast stated that the Turkish Cypriot Chamber of Commerce, in a general report on economic conditions, had placed the overall increase in the cost of living since 1974 at 230 percent. * * * Statistical reports are issued regularly by the government of Cyprus ministries, departments, and agencies that furnish generally up-to-date information on sectoral and broader areas of the economy. Particular attention is called to the annual Economic Report prepared by the Statistics and Research Department of the Ministry of Finance, the Statistical Abstract issued by the same department, which provides comprehensive information on all aspects of the economy on a time series basis, and the annual report of the Central Bank of Cyprus. An excellent, very readable background survey of the economy from earliest times to 1914-with some supplementary information to the 1950s-is offered in Diamond Jenness' The Economics of Cyprus. The agricultural cooperative movement is discussed extensively in Paris Andreou's Agricultural Development and Cooperative Marketing in Cyprus, and a broad picture of land tenure development, plus a survey of the situation that resulted from the Turkish intervention in 1974, is available in Land Ownership in Cyprus by Karouzis. The Turkish Cypriot administration has published statistical yearbooks annually since 1976 covering various aspects of the economy. Only the yearbook for 1978 was available during preparation of this chapter. (For further information see Bibliography.)