The European Commission yesterday adopted its Convergence Report 2004 which states that Cyprus at present meets just two of the five economic criteria needed to join the European single currency.
According to the report, Cyprus currently meets the convergence criteria on inflation and long-term interest rates, but remains out of step with the EU regarding the government’s budget deficit, exchange rate stability and legal compatibility.
The Convergence Report states:
“As regards central bank integration into the ESCB at the time of euro adoption, legislation in Cyprus, in particular the Central Bank of Cyprus Law is not fully compatible with Article 109 of the Treaty and the ESCB/ECB Statute.
“The general government deficit was 6.4% of GDP in 2003 and government debt was 70.9% of GDP. Cyprus does not fulfil the criterion on the government budgetary position.
“The Cyprus pound is not participating in ERM II and is pegged to the euro with a 15% fluctuation margin. Cyprus does not fulfil the exchange rate criterion.
“In the light of this assessment the Commission concludes that there should be no change in the status of Cyprus as a ‘Member State with a derogation’”.
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