Crumbling houses riddled with bullet holes and coils of razor wire line the no-man’s land between the Greek and Turkish sides of the Ledra Palace checkpoint in Nicosia. Gory murals show smiling young Greek Cypriots allegedly murdered by Turkish Cypriot forces, while UN posters warn against photographing the buffer zone. “Turkish Republic of Northern Cyprus Forever” proclaims a banner on the other side.

Nicosia is Europe’s last divided capital. Cyprus, a former British colony, became independent in 1960 but UN peacekeepers have been deployed there since 1964. When Greece tried to seize the whole island in 1974, Turkey invaded. Nine years later the Turkish side declared itself the Turkish Republic of Northern Cyprus, recognised only by Turkey.

But one of the world’s thorniest diplomatic problems could be solved by the end of the year. A new generation of leaders – Demetris Christofias on the Greek side, elected in February, and Mehmet Ali Talat for the Turkish Cypriots – are keen to unify the island, as long as their communities’ interests are protected.

“Now is a time of optimism, with a real sense of hope on both sides,” Michael Moeller, the UN special representative for Cyprus, who is overseeing the unification process, tells Monocle. “For the first time in the history of the conflict there are two leaders, who are pro-solution, who come from similar political backgrounds, know each other and like each other and have been in dialogue during the past decades. That has made a complete change of tone and attitude which affects the substance. The sense of mistrust is rapidly evaporating.”

The basis for any future settlement remains the Annan plan, named after the former UN secretary general, which calls for a federal United Republic of Cyprus, composed of Greek and Turkish Cypriot states of equal status, with an alternating president and loose central government. Both sides voted on the Annan plan in April 2004. The Turkish Cypriots voted yes, but the Greeks rejected it.

The world has moved on since then. Greece and Cyprus are both members of the EU, and Turkey hopes to join eventually. Almost everyone understands that it’s simply no longer feasible for the easternmost flank of the EU to be technically at war. And on a sunny spring day at the Ledra Palace checkpoint, the guards are relaxed, waving visitors through, even though they may soon be out of a job.

Monocle: Why is the process of unification speeding up now?
Mehmet Ali Talat: The most important reason is a big change in Greek Cypriot policy, starting with the new leadership under Demetris Christofias. We’re friends. There is a different atmosphere. Also, the awareness by Greek Cypriots that the island is approaching permanent division.

M: What would be the consequences of a permanent division?
MT: That is debatable. Some aspects might be positive, some aspects negative. Generally that is not our preference. The decision of my people is to unify the island, find a comprehensive solution and form a new partnership. The majority of Greek and Turkish Cypriots are in favour of unification of the island.

M: Is the 2004 Annan plan a basis for Cypriot unification?
MT: It will be the real basis of a solution. The Annan plan did not come from the sky. It was prepared by the UN by intensive work from experts, politicians and leaders of both sides.

M: Is there anything you disagree with in the Annan plan?
MT: Many points are not digestible for Turkish Cypriots. A lot of people will lose their homes because they will be handed back to Greek Cypriots. A lot of territory will be handed over to the Greek Cypriot state. It limits the number of TRNC citizens whose origins are not Cypriot. A fourth of the population is of Turkish origin.

M: Were you disappointed at the Greeks’ rejection of the Annan plan in 2004?
MT: Very deeply. It was unimaginable but it happened.

M: What is the timetable for a comprehensive solution?
MT: By the end of this year. That is our target. First we will agree on a settlement, that will be put to simultaneous referendums on both sides – to Turkey, Greece and Britain; to the UN and the EU – then a solution will be implemented and we will see the removal of barricades.

M: What points are crucial for you?
MT: That Turkish Cypriots will be politically equal to Greek Cypriots and the two constituent states will be equal.

M: How will property restitution be dealt with [Greek property in the north has been taken over, even sold for development]?
MT: Property will be solved by restitution, exchange and compensation. Each case will be dealt with one by one.

M: In Bosnia attempts to develop unitary, federal institutions have not been very successful. Why will it work in Cyprus?
MT: I can’t guarantee that a solution will work. But the Turkish Cypriot side will do its best. If the Greek Cypriot side does the same, there will not be any problems.

M: Are you under pressure from Ankara to reach an accord, as Cyprus is a hindrance to Turkey joining the EU?
MT: We have the unconditional support of the Turkish government on all issues. We collaborate and we consult each other on every aspect.

M: Do your interests as president of the TRNC always coincide with Ankara’s?
MT: We weigh our options, whether it will work to do something or not, and we decide accordingly. Sometimes we go with them, sometimes we say, no, this is our case and our decision.

M: There is criticism that financial regulations here are too lax.
MT: That is not true and aside from that, we are cooperating with the European Commission to make new laws to control money laundering issues and the financing of terrorist organisations.

M: How is the economy doing?
MT: Economic growth was quite good but has slowed because of the isolation. Our economy is dependent on tourism, we have no manufacturing. We had a drought. In 2005 and 2006 it grew at a high rate but now it declined about 2.5 per cent. We will need support from Turkey again.

M: Is there a Cypriot identity that is not based on being Greek or Turkish?
MT: So far there is not such an identity. There are Turkish Cypriots and Greek Cypriots but to be only a Cypriot has not happened yet.

M: Is there a feeling that the days of checkpoints and borders are over, that Europe is now united?
MT: That will happen when there is a comprehensive solution. Not because of EU membership.

M: How much of a factor has Kosovo been in speeding up negotiations?
MT: Kosovo is a unique case, like Cyprus. Their histories are not very comparable. But internationally Kosovo received great support from the important players and succeeded in something impossible. This can be a lesson to everybody, including Turkish Cypriot leaders.

M: Are you saying that Kosovo could be a template for the TRNC?
MT: The TRNC has already declared its independence. Recognition is something else. The Security Council has banned the recognition of the TRNC. But our policy is to solve the problem comprehensively.

M: What can a settlement bring to Europe?
MT: The eastern flank of Europe will be protected. Now the biggest vulnerability of the EU is in this region. On one side a member state, Greece and another half-member, half of Cyprus; on the other, two candidates, Turkish Cypriots and Turkey, can go to war. It is always possible. The Cyprus problem is poisoning the European Union.

M: You are from this island. Do you feel a personal responsibility?
MT: To solve the Cyprus problem is the most heavy burden on my shoulders. On one hand I am proud. On the other, I am bored. This issue is boring. Politicians in other countries are dealing with developing their countries, the prosperity of their people and their economies. We have to fight against restrictions, isolation and the international community, which does not consider the two sides equal.

1952: Born in Kyrenia, Cyprus, Talat studied electrical engineering in Ankara. He was a founder of the Turkish Cypriot Students Youth Federation and was active in the left-wing Republican Turkish Party.
1993: After the general election, Talat served as minister of education and culture and deputy prime minister.
1996: Elected leader of the RTP.
2003: Appointed prime minister of the RTP-Democratic Party coalition government. Endorsed the UN unification plan for Cyprus that was put to the vote in 2004. Turkish Cypriots accepted the plan, but Greek Cypriots rejected it.
2005: Again appointed prime minister after the coalition won a second victory. Elected president in April 2005.

Germany
Germany reunified on 3 October 1990, 31 years after being split between its capitalist West and communist East. The legal process was straightforward – East German territory was reorganised into the five federal states it had encompassed before the split. The economic process has been more difficult – in 2005 the cost of rebuilding East Germany was estimated at €1.25 trillion.

Yemen
The Republic of Yemen was established on 22 May 1990. Prior to that, Yemen had been split into the communist People’s Democratic Republic of Yemen and the Yemen Arab Republic. Reunification was incremental but was hastened by the demise of the USSR, and abetted by the lack of cultural or linguistic division between north and south.

Vietnam
Vietnam’s unification, under internationally supervised elections, had originally been scheduled for 1956, after the French defeat by the communist Viet Minh in 1954. Intervention by the US delayed founding of the Republic of Vietnam until 1976. The reality of the supposedly peaceful reunification was annexation at gunpoint.