Central Bank denies worried pound to fall in ERM2

THE CENTRAL Bank of Cyprus angrily denied a newspaper report yesterday that said it was concerned that the Cyprus pound would lose value after going into ERM2.

“I can categorically state that this is unsubstantiated,” said Central Bank governor Christodoulos Christodoulou in response to the report in the daily Simerini.

The report said Christodoulou was concerned the pound would fall because trading would “no longer be controlled by the Central Bank” and because of the larger fluctuation margin the pound would have against the euro.

At present Cyprus keeps an unofficial reference rate of one Cyprus pound equalling 1.7086 euros. It fluctuates within an unofficial trading band of 15 per cent, but is routinely kept within 2.25 per cent in line with ERM2 rules.

The Cypriot newspaper said the governor had privately raised his concerns at a meeting with the Cyprus Chamber of Commerce and Industry on Wednesday.

The no-nonsense Christodoulou is normally hawkish to the extreme on the currency and the reported comments would have been out of character.

“It’s a figment of their imagination,” Christodoulou said.

Cyprus is believed to be in the final stages of preparations to join the European Exchange Rate Mechanism, a stabilisation band pegging the pound to the euro.

Officials say Cyprus could join by the end of June.

Cypriot officials have been cautioned by the European Central Bank in the past to be more tight-lipped concerning their ERM2 plans and currency rates.

Several senior officials are however known in private discussions to strongly support maintaining the pound at its present rate categorically ruling out any talk of allowing it to depreciate.

“Contrary to what is alleged in the report, I had referred a query to a recent IMF report on Cyprus. That had clearly stated that the present value of the Cyprus pound reflects economic fundamentals, with therefore no reason to devalue,” Christodoulou said in a written statement.
The IMF report was prepared in November.

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.