Cyprus Likely To Adopt The Euro In 2008, Say Analysts

by Lorys Charalambous, Tax-News.com, Cyprus

18 February 2005

According to a survey conducted by Reuters, most analysts are expecting Cyprus to be in a position to join the European Monetary Union in 2008, in line with the government’s expectations for the adoption of the sinlge currency.

Cyprus is hoping to join the Exchange Rate Mechanism (ERM), the first step towards the adoption of the euro, sometime during 2005, and the survey would appear to be in line with the government’s view of the situation.

Once inside the ERM, the value of the Cyprus pound will be allowed to fluctuate by 15% above or below a yet-to-be determined peg with the euro, and the currency will need to be tied to the exchange rate mechanism for a minimum of two years prior to joining the euro.

The plan depends on the government’s ability to bring the budget deficit back to more acceptable levels through cuts in expenditure and increases in tax revenues.

The Reuters survey also considered the position of Turkey and its relationship with the European Union, and most analysts were of the view that accession talks were likely to commence on schedule in October 2005, with the country acceding to the Union sometime around 2015.

However it was felt that the issue of a customs union with Cyprus would be likely to complicate accession talks for Turkey.

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