Island Economies of the Mediterranean

Join us for an island-hopping tour of the Mediterranean, with a focus on each island’s history and economy.

Photo by JR Harris on Unsplash

The Mediterranean basin has been home to an interesting collection of civilizations since classical antiquity: Greeks, Phoenicians, and Egyptians make up just the beginning of a truly long list.

Smaller island-nations across the Mediterranean were also noteworthy.

Admittedly not as mighty as the continental civilizations which ruled the basin, island civilizations still played an important role in trade.

Mediterranean islands often enjoyed some degree of autonomy, enabling them to function as safe stops across major Mediterranean trade routes of the time.

The Minoans inhabiting Crete, for instance, were competent seafarers who maintained contact with various civilizations across the Mediterranean, thus acting as a point of contact for civilizations located to the north, south, and east of the Mediterranean basin.

The region’s island-nations seem to have enjoyed a relatively steady state of peace and prosperity with low involvement in military and political turmoil. Crete famously escaped the bloody Greco-Persian wars (499-449 BC) relatively unharmed.

This pattern seems to dominate the island economies of the basin to this day: a high degree of business-friendliness, impartiality in most geopolitical conflicts, and openness to almost everyone.

Since the late 20th century, these island economies have increasingly played their most powerful card to attract wealthy individuals from across the world: tax exemptions.

With a rich history, pleasant Mediterranean climate, and a growing population of well-to-do bon vivants residing in islands such as Cyprus, Malta, and the Balearics, tourists have also started to drop by, giving island economies of the region yet another source of revenue.

This is a list of six important Mediterranean island economies, with a brief review of their past, present, and perhaps future.


Situated in the east of the Mediterranean, Cyprus was first settled by people of Greek origin circa 1000 BC, though it was an overseas dominion of the Neo-Assyrian Empire before.

In more modern times, Cyprus struggled under colonial rule. Its independence in the 1960s was not free of crises between ethnic Greeks and Turks. Troubles peaked in 1974 leading to military friction between Ankara and Athens, but a de facto divide between the south and north was achieved which continues to this day.

Cyprus gradually moved toward better political stability with the turn of the millennium, joining the European Union in 2004.

The island has largely left behind its years of trouble to evolve into a “free” country, according to a rating by the Washington-based Freedom House. The island-nation is now also a high-income westernized economy, according to the World Bank.

Cypriots now enjoy high standards of living and a “very high” human development index (HDI).

Cypress is not only a picturesque Mediterranean island with turquoise waters and stunning beaches, but it also boasts an open and thriving service-based economy, complemented by some light manufacturing.

With its strategic location, the island has branded itself as an economic hub linking the East and West, opening up exciting opportunities for international trade and investment.

Cyprus’s economic metamorphosis has been attributed to the implementation of a market-driven economic structure as well as the presence of a vibrant and adaptable entrepreneurial culture.

Thanks to its cultural openness, multilingualism, and high financial clarity, the capital, Nicosia, has attracted investors from Europe and the Middle East in recent years.

The country offers one of the lowest corporate tax rates in the Eurozone and has practically no exchange restrictions.

There is little wonder, therefore, that it has found favor with entrepreneurs and investors. The island’s multibillion-dollar economy relies almost exclusively on its status as a business hub, though its thriving tourism and travel industry are also great contributors.


Just under 800km to the west of Cyprus, lies the island of Crete. Unlike Cypress which is a sovereign country, the island of Crete is part of Greece, constituting one of the country’s 13 administrative regions.

Much like Cyprus, however, Crete has been inhabited by waves of settlers from mainland Greece after the Bronze Age. The island’s name comes up quite frequently in historical texts from classical antiquity, including in discussions of the endless wars between coalitions of Greek city-states.

After classical antiquity, Crete experienced Roman rule, two periods of Byzantine rule, Andalusian Arab rule, Venetian rule, Ottoman rule, military occupation by colonial powers, and even a short period of independence, until its reunification with the modern state of Greece was internationally recognized in 1913.

Crete’s modern economy, as an island, cannot be viewed separately from that of mainland Greece. However, Crete Region is noted for having a strong service-based economy, which has evolved into its present from since the 1970s with the rise of tourism in the country.

Heraklion, the island’s administrative capital, has for years registered the largest number of arrivals in Greece after Athens.

Although Crete continues to receive its fair share of tourists, quite interestingly, it is one of the only Greek regions today that can—in theory—carry on without tourism, thanks to its profitable agricultural sector.

The island is a top producer of olives and grapes among other things, and generates added value by exporting processed products such as refined olive oil and bottled wine, instead of exporting in bulk.


By going further west for roughly 1,000km we will get to the Maltese archipelago in the central Mediterranean, whose largest island is Malta.

Over its history, the island has seen the arrival of all the usual suspects: Phoenicians, Romans, Byzantines, and Carthaginians. In more modern times, even Napoleon occupied Malta, personally staying on the island for a week.

The British followed suit, making Malta a colony for the next 150 years and a strategic Mediterranean dockyard for the Royal Navy. The independent Republic of Malta was finally established in 1974 and joined the European Union in 2004.

However, since the year 1090 AD, Malta has been culturally Sicilian and mainly inhabited by people from southern Italy, though it has naturally absorbed many cultural influences over the years.

Malta is today an “advanced economy” according to the IMF. Much like the olden days, Malta today is regarded as a maritime hub thanks to its strategic location in the middle of the Mediterranean and along the Gibraltar-Suez route.

The island-nation’s attractive tax system is a big draw for those with deep pockets from Europe and beyond. The capital city, Valletta, has turned into a growing financial center since joining the Eurozone in 2008.

Malta has traditionally also been quite popular with Europe’s art community, with many choosing to reside on the island.

Malta has become a go-to location for any film project set in a vaguely Mediterranean location. The 2000 box office hit, Gladiator, was famously shot on the island.

This has made the Mediterranean island even more popular with tourists, making tourism yet another source of revenue for the Maltese economy.

Stay tuned for the second part of TBY’s coverage of the Mediterranean island economies, in which we are going to continue our island hopping journey through Sicily, the Balearics, and Corsica.