Brussels and Washington have reacted strongly to Turkish President Recep Tayyip Erdogan's decision to partially reopen a coastal resort town emptied of its original Greek Cypriot residents as well as his proposal for a two-state solution on the island of Cyprus.

His uncompromising speech in the north of divided Nicosia marked another step towards opening up the ghost town and former resort of Varosha, in violation of UN resolutions and slammed as "unacceptable" by the European Union.

"We don't have another 50 years to waste," Erdogan told a crowd at a parade to mark the 47th anniversary of his country's invasion that divided the Mediterranean island.

He was referring to decades of failed UN-led efforts to reunite the Greek and Turkish Cypriot-controlled sectors of Cyprus.

"No progress can be made in negotiations without accepting that there are two peoples and two states with equal status," he said.

EU top diplomat Josep Borrell issued a statement calling on Erdogan to stop provocation and return to a dialogue over the Cyprus issue based on the basis of a "bi-zonal, bi-communal federation with political equality."

The same proposal was reiterated by US Secretary of Foreign Affairs Antony Blinken.

Erdogan also voiced support for Turkish Cypriot plans to reopen a part of Varosha, effectively handing over control from the Turkish military and changing the status quo, in defiance of UN resolutions.

"The doors of a new period that will benefit everyone will open in Varosha," Erdogan said.

Turkish Cypriot leader Ersin Tatar, who is close to Erdogan and supports a two-state solution rather than the federation long sought in UN-led negotiations, said an initial 3.5 percent of Varosha would "be removed from its military status."

Erdogan said this showed "how sensitively Turkish Cypriot authorities approach this issue." But Borrell swiftly slammed any such move as "an unacceptable unilateral decision."

(With input from agencies)