Military

DATE=2/12/2004

TYPE=CORRESPONDENT REPORT

TITLE=U-N/CYPRUS (L-O)

NUMBER=2-313054

BYLINE=PETER HEINLEIN

DATELINE=UNITED NATIONS

CONTENT=

///// TALKS BEGIN AT 3 P.M. ET. THIS IS A HOLDING SPOT UNTIL TALKS ARE COMPLETED. UPDATES TO FOLLOW. /////

INTRO: Turkish Cypriot leader Rauf Denktash has submitted a new timetable that would allow a united Cyprus to join the European Union in May. Mr. Denktash made the proposal during talks at the United Nations with Greek Cypriot President Tassos Papadopoulous. Peter Heinlein in New York reports, the talks are continuing, with U-N Secretary General Kofi Annan acting as mediator.

TEXT: The Greek Cypriot and Turkish Cypriot leaders are meeting for a third day in the face of intense international diplomatic pressure to heal their 30-year rift.

Diplomats at the United Nations say Mr. Denktash came forward with a proposal Wednesday that has given fresh hope of a settlement.

The Denktash plan calls for continuation of three-party talks in Cyprus, with a March 20th deadline. If no deal is reached by then, Greece and Turkey would be invited to join the process for a final one-week push. If that fails, all sides would agree to allow Secretary General Annan to decide all outstanding issues.

There was little immediate reaction from others at the talks. Mr. Annan would only say "as long as we are talking, there is hope." His spokesman, Fred Eckhard, was also cautiously optimistic.

/// ECKHARD ACT ///

It went better yesterday than the day before.

/// END ACT ///

The Greek Cypriot side made no public statement. But Greek Foreign Minister George Papandreou, who is said to be in close contact with the Greek Cypriot delegation, was quoted Thursday as saying he thinks a deal is within reach.

One of the chief sticking points in the talks is said to be a concern by both Cypriot factions about giving the secretary-general authority in advance to settle any differences still outstanding from the talks.

Spokesman Eckhard says Mr. Annan is sticking to this formula.

/// ECKHARD ACT ///

They have to negotiate with each other. The Secretary General's proposal was, 'If you find you can not resolve this or that, then leave it to me to fill in the blanks' as a fair exercise of his good-offices function.

/// END ACT ///

Any agreement that is reached through this process would then be put to separate referenda in both Greek and Turkish Cyprus in late April. If voters approve, a united Cyprus would join the European Union May first.

Turkey is the only government that recognizes Mr. Denktash's Cypriot entity. The Greek Cypriot state is widely recognized, and will become an E-U member May first, regardless of the outcome of the U-N-mediated talks.

Diplomats on all sides agree that failure to reunify would further deepen Turkish Cyprus's isolation, and would also damage Ankara's chances of joining the European group. (SIGNED)

NEB/NYC/PFH/TW/RAE