Cyprus is on course to join the European Exchange Rate Mechanism (ERM) early in 2005 provided the government’s fiscal consolidation plan succeeds in reducing the budget deficit, President Tassos Papadopoulos has claimed.
Addressing the prize-giving ceremony of the country's annual export awards, Papadopoulos indicated that persistence with the austerity measures, designed to bring the budget deficit below the 3% of GDP ceiling laid down by the EU stability pact, could pave the way for the Cyprus pound’s entry into the ERM by the end of the first quarter.
"Our fiscal consolidation plan was approved at the last Ecofin (EU finance ministers) gathering and we have indications that if we follow it steadily, by March 2005 we can join the Exchange Rate Mechanism," Papadopoulos confirmed.
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.
Cyprus will need to be tied to the exchange rate mechanism for a minimum of two years prior to joining the euro, and has expressed the wish to join the single currency no later than 2008.
The Cyprus Central Bank has been successfully shadowing the euro for a number of years now.
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