Tomorrow, the citizens of the republic of Cyprus, and of the Turkish protectorate in Cyprus will be voting in referendums on the UN-brokered for reunification of the island. The plan is unsound and will hopefully be rejected, at least by the Greek-Cypriot side, despite massive advertising and pressure from the United States. Here is why.
In 1974, Turkey invaded the republic of Cyprus and captured about 1/3rd of its territory, in the north of the island. It was a real military invasion, with paratroopers and many dead. The turkish army drove out the mostly Greek inhabitants with acts of terrorism (such as mass rape) taking over their land in the property as well as the state sense. Turkey then set up a protectorate state, which is recognized formally only by Turkey, but also de facto by Britain who are happy to trade with it.
Turkey claimed that it acted to protect the Turkish minority in Cyprus, who were being oppressed by the Greeks, and whose prospects would worsen if Cyprus merged with Greece, as it was then contemplating. This oppression was true, although of course it was used as an excuse. Likely true motives for the invasion were: A need to fight and win wars against "enemies" in order to boost the military government within Turkey; Part of a greater plan to capture more territory for ethnic Turks; A possible boost to the strategic importance of Turkey, which is a US client state, over Greece, which since WW2 has exhibited various anti-US or communist leanings.
Cyprus is a desirable piece of real estate, but otherwise it does not control important natural resources and it has a small population. The part captured by Turkey is the less valuable. Given Turkey's size and resources, the value of the land doesn't seem to justify the interest (as opposed to, say, Kurdish land, which has oil). Cyprus as a whole does have huge strategic importance, as it is a safe western nation off the coast of the Middle East. Britain maintains two gigantic military bases on the island, and both Britain and the US are very keen to retain them. It's possible that a climate of confrontation between the Greek and Turkish powers may facilitate the bases staying there.
The Greek part of Cyprus is a reasonably modern capitalist state, and is due to become a full member of the EU on the 1st of May, regardless of the referendum. Other than having lost their homes, the human effects of past violence, a fear that it might happen again, and a Berlin-style fence through the capital, the occupation doesn't cause day-to-day problems for life in the Greek part. The Greeks seek remembrance and redress, but otherwise they don't seek a change of governance or national status. Neither the republic of Cyprus nor Greece have any inclination to merge. If there is one institutional change that the Greek Cypriots desire, it is to end the influence of the British on their country.
The Turkish side, on the other hand, is run as a fiefdom serving the interests of the governing family and their (mostly British) business partners. There is very little to recommend being a Turkish-Cypriot citizen, and they have every reason to want change. Firstly, they need to replace their corrupt government with something reasonably democratic. Secondly, they would wish to legitimize their status, become citizens of some recognized state, and stop being used as pawns by Turkey. They would certainly be better off if Turkey annexed the territory and they became Turkish citizens. Arguably they might be better off if they became, once again, minority citizens of the republic of Cyprus, given suitable guarantees. In fact pretty much any institutional change would improve their prospects.
The proposed plan
The plan drafted by the UN creates a two-level state structure where the Greek and Cypriot "communities" become members of a confederation, which itself takes the place of the republic of Cyprus as a sovereign state. The two territories are separately administered, with freedom of movement of goods and people that is less than the EU norm. There are various quotas for who may return to claim their home, how many turkish settlers are allowed, etc. Both Turkey and Britain retain a significant role as a providers of security, and a huge portion of the plan's text concerns the status of the British bases. Overall, the proposed state machinery is unconvincing, with dispute resolution involving a panel of Greek, Turkish, and foreign judges. I do not actually know the details, which are very complex. However the essential character is clear: It is a proposal to accept and legitimize the two territories that resulted from the occupation, give the Greek population limited rights to reclaim their property, and maintain external influence.
This plan has little to do with what the Greek Cypriots want. They want the Turkish occupation to end, reverting the whole island to Greek governance, to reclaim their property, and to receive reparations to whatever extent is possible. This may be a just thing to want, but of course it is quite unrealistic. It could only happen, and that would be a tall order, if the EU set it as a hard criterion for Turkey's accession. However, the EU has no plans to do this because Turkey is not nearly ready to enter the EU for a host of other reasons (governance, nationalism, economic model, links with the US). The Greeks should not expect a UN-brokered plan to offer redress, much as this expectation was irresponsibly maintained by Greek politicians. The element of redress that the plan does offer, a limited ability for refugees to return to and reclaim their properties, is not sufficient. Such properties will be located in Turkish territories, which means Turkish schools, Turkish administration, etc. So in practice, few Greeks will be able or willing to take advantage of the provisions.
The Turkish Cypriots have good reasons to accept the plan, since their situation is so unattractive that most forms of "solution" would be an improvement. However, the plan is not an ideal solution even for them. It legitimizes their state and improves their governance, but the proposed state and governance are still questionable. They (and the Greeks) are still practically confined to their territories, as there is no convincing proposal for a whole island free of discrimination. Turkey, which has used them rather callously so far, retains a strong role. Accepting the plan may give the Turkish Cypriots a great improvement, but it would probably be the last that they get and it's not on a part with the rights with other EU citizens.
The rhetoric of the UN, but even more so of the US, gives the impression that there is an urgent need to achieve some kind of "solution" to the problem. There isn't. A real solution is wanted, but both populations have lived with the problems, in relative stability, for 30 years. The only cause of urgency is that next month the republic of Cyprus will join the EU, at which point its negotiating position will be massively strengthened. Indeed it would seem irresponsible for the Greek Cypriots to accept a UN-brokered plan, even a good one, on the eve of joining the EU. On the 1st of May, Turkey, which allegedly desires to enter the EU, will be illegally occupying EU land. Conversely, if the plan is accepted, a precarious state formation including Turkish influence will join the EU instead of Cyprus, and the norms of the EU will be bent in various ways. It's easy to see why Turkey and their masters want the plan accepted in a hurry. In fact, the strength with which Colin Powell talks about urgency, a "last chance", etc. suggests that it is the US, not the republic of Cyprus, who feel the urgency.
The plan does serve the interests of the UK and the US more than any other: It guarantees the presence of the British military bases; It offers Turkey a solution for the historical problem caused by the invasion, which is of value both internally and in terms of its international relations. Most importantly, it introduces a Turkish leverage into EU affairs (through the accession of Turkish cyprus) and makes it easier for turkey to enter the EU in the future. I believe, although of course this is speculative, that the main interest of the US in the matter is to use Turkey in order to control and weaken the EU. The US runs a military-industrial capitalism internally and with its close allies (UK, Israel, Turkey) while internationally it seeks to impose a normative capitalism: one where rules are set in favor of capital and capital does the rest. The EU, meaning the Franco-German vision, wishes to maintain a social capitalism internally (one where prosperity and convergence are subsidized by social spending) while competing for influence in the normative capitalism outside. I believe the US, UK, and Turkish agenda are to reduce the EU to a local chapter of a normative capitalism dominated by the US. There are signs that the US tried to use influence in Eastern Europe to the same ends, but largely failed to do so before these countries entered the EU.
If the plan is rejected, the Republic of Cyprus will become a modern EU state while the Turkish colony will be stuck in its 70s non-state. This will cause the invasion to be seen as a failure in Turkey, and the party most associated with it historically (probably the military-secular party that the US likes) will lose popularity. Turkey may then annex the territory (making the Turkish Cypriots full Turkish citizens), as it has previously hinted and as talk of a "last chance" implies, which would improve political opinion internally but damage Turkey's international relations, especially with the EU. In that case, the militarist-secular faction in Turkey will probably seek even stronger US ties, and Turkey will probably become a more obvious US ally and client state, like Israel. The US will see Turkey as more useful in controlling the Middle East than in controlling the the EU. This outcome does not seem very attractive for the majority of Turkish citizens.
In theory, a better solution to the Cyprus issue would be for Turkey to eventually join the EU, and for Turkish Cyprus to come with it, under terms decided by negotiation between Turkey and the EU. The EU norms for freedom of movement and settlement, freedom to acquire property and establish business, and protection from discrimination in all EU states in my opinion offer a more convincing basis for people of Greek and Turkish ethnicity to live together in Cyprus. Although the EU has a non-existent track record, and no apparent willingness, to solve settlement or discrimination issues in the case of Northern Ireland or the Basque territory, these conflicts are ancient by EU standards. In the case of Cyprus, the invasion happened in 1974 and is well-documented. It may be possible for the Greeks who lost their homes to request their return through legal means, by appealing to the European courts as a collection of individuals.
As already mentioned, Turkey seems unlikely to join the EU any time soon due to its economic and political alignment, and this prospect becomes even more remote if the plan for Cyprus is rejected. Most likely (if Turkey doesn't immediately annex the territory), the EU will then pressure Turkey to withdraw from Cyprus and seek some way to integrate Turkish-Cyprus into the EU ahead of Turkey. Objectively, this is not a bad solution. It would grant the Turkish-Cypriots a legitimate state and a huge leap into EU modernity, while reducing their ties with the motherland that has been so "nice" to them in the past. It would also allow populations to move and settle freely, provide some form of dispute resolution in cases of discrimination (EU courts) that is more convincing than the UN plan, and still solve the diplomatic problem of Turkey occupying EU land. Politically, however, such a solution would be very hard for Turkish people. In Turkish Cyprus, both the Turkey-imposed government and the Turkey-planted settlers would be against it, while generally there would be fear and uncertainty. In Turkey, it would seriously damage the secular-militarist faction that has so far dominated politics. I don't know that such a solution would be attractive to the other faction (the Islamist) and I don't believe there exists a strong pro-European, less tied to the Americans, secular faction.