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grew rapidly. In the immediate aftermath of the de facto division of the island,
manufacturing exports, output
and growth experienced a significant boom.
However, there were downsides to ali this forced modernisation. After 1974,
Cyprus became more dépendent on external financing, government became more
interventionist and the total tax burden on the economy grew considerably.
The impact of the war on the labour market and labour relations
The most obvious effect of the coup and invasion on the labour market of the
Republic of Cyprus, was on the unemployment rate. Suddenly the percentage of the
economically active population registered as unemployed increased sharply from
1.5% to nearly 30%. What has to be taken into considération, however, is that the
pre and post 1974 Republic represents two very différent economie entities. Also, in
the pre 1974 period there was much hidden unemployment and under-employment,
particularly in the Turkish-Cypriot economy, which is not reflected in Republic of
Cyprus statistics (see Chapter 3). However, if generally unemployment was very
low in the Greek-Cypriot community before 1974, it rapidly rose in the summer of
that year. Much of this rise can be seen as instant structural unemployment, as
whole industries, such as mining and major parts of other industries, for example
export agriculture, were lost to Greek-Cypriot labour overnight and forever. With
the rapid adjustment to the de facto territorial changes, which of necessity triggered
these structural changes, what initially looks like structural
unemployment
increasingly looks like frictional unemployment, because of the speed of labour's
absorption into new growth sectors of the economy (Figure 2.20).
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