Cyprus envisages euro entry by 2008

CYPRUS has yet to set a date for entering ERM-2, the ante room for joining the euro, but envisages adopting the common currency by 2008, Finance Minister Makis Keravnos said yesterday.

Keravnos said he had discussed the ERM-2 issue at a meeting of European Union finance ministers last weekend. “A specific (entry) date has not been defined. We want to be sure that when we do make our move we will have positive results,” he told CyBC radio.

Asked if he considered swift admission to the euro zone feasible, Keravnos said: “It can be achieved. It is not easy, but it can be done… It is not important if we get in at the end of 2007 or beginning of 2008. The important issue is to get in.”

Cyprus had hoped to join the euro in 2007 but delays to the ERM-2 application and fiscal slippage have made that target uncertain. The EU newcomer is widely expected to bide its time on the application until it has proof that an economic convergence programme to cut the budget deficit yields results.

“The government targets remain. I think it is important to accede to (the mechanism). The benefits to the economy will be significant,” Keravnos said.

Once a frontrunner for speedy euro adoption, Cyprus has seen its public finances deteriorate in recent years with present budget deficit and public debt levels exceeding European Union rules.

ERM-2 would require locking the Cyprus pound in an agreed parity against the euro and within a fluctuation band for at least two years.

Cyprus forecasts it will cut its budget deficit to 2.9 per cent of gross domestic product by the end of next year — just below the EU ceiling of 3 per cent — if authorities adopt cost savings outlined in the convergence package.

Without it, the deficit could spike to 5.8 per cent, the government has warned. The state expects a shortfall of 5.2 per cent for 2004, aided in part by lower defence spending.

Savings include a freeze on new recruitments and pay rises in the public sector and an increase in the retirement age to cut down on pension payments.

The Cyprus Mail is the only English-language daily newspaper published in Cyprus. It was established in 1945 and today, with its popular and widely-read website, the Cyprus Mail is among the most trusted news sites in Cyprus. The newspaper is not affiliated with any political parties and has always striven to maintain its independence. Over the past 70-plus years, the Cyprus Mail, with a small dedicated team, has covered momentous events in Cyprus’ modern history, chronicling the last gasps of British colonial rule, Cyprus’ truncated independence, the coup and Turkish invasion, and the decades of negotiations to stitch the divided island back together, plus a myriad of scandals, murders, and human interests stories that capture the island and its -people. Observers describe it as politically conservative.