CYPRUS will remain at least two years in the Exchange Rate Mechanism II (ERMII) before adopting the euro, either in late 2007 or early 2008, Finance Minister Makis Keravnos said yesterday.
Keravnos was speaking after a meeting of the National Advisory Committee for the Adoption of the Euro, which met for the first time yesterday.
“At least for two years we will remain in what is called the ‘waiting room’,” he said referring to ERM II, which Cyprus joined over the Easter weekend along with Latvia and Malta.
“From there and after it is not so important if it is the first of 2007 or the first of 2008. What is important is that we are prepared in time so that we can adopt the euro without any negative repercussions.”
He warned, however, that the path to adoption of the euro would not be a bed of roses and that hard work would be needed to bring the fiscal deficit to 2.9 per cent for 2005 to come within the Maastricht 3 per cent ceiling. The deficit in 2004 was 4.8 per cent.
“As you know, the government has approved the plan of action for the adoption of the euro, which was jointly worked out between the Finance Ministry and the Central Bank. This is a course to permanently cleanse the public finances, and we must remain vigilant for the next two years. We have still very important and difficult work we must carry out,” he added.
Keravnos said the plan envisaged first stabilising the economy to put in on a sound base. The next step would be technical preparation for the adoption of the euro, the adaptation of accountancy systems in the public and private sectors, and the creation of an institutional framework for the currency.
The Minister said the government has in front of it details of all the difficulties which had been faced by other countries that had adopted the euro. Cyprus would be able to learn from past mistakes, he said, which would ensure that the currency changeover ran more smoothly.
“The difficulties faced by other countries were discussed at today’s meeting and the Ministry of Finance has already contracted agreements with countries in order to study their experiences, and the Central Bank has done the same,” said Keravnos, adding that co-operation with Brussels would also be very close to ensure a minimum of repercussions.
Asked about the probability of profiteering during the changeover, Keravnos said that in a free market economy prices could not be fixed, but added the government would ensure the proper infrastructure was in place to keep an eye on such developments.
