Cyprus To Join Eurozone In February 2008

by Lorys Charalambous, Tax-News.com, Cyprus

29 January 2007

At a press conference last week, Cypriot Finance Minister Michalis Sarris said that Cyprus will apply for accession to the Economic Monetary Union (EMU) next month.

He pointed out that in May, Cyprus will have completed the two years in the Exchange Rate Mechanism (ERM II) required before a member state can enter the EMU, and said that the government is proceeding with the necessary legislative reforms.

'Based on these data, we hope that we will submit our application in mid February, so that Cyprus will be evaluated by March - April, the necessary recommendations from the competent committees and the Finance Ministers Council (ECOFIN) will be made and the EU Heads of States and Governments will take a decision around July,' Sarris said.

Earlier in the month, the Cypriot Council of Ministers decided that Cyprus will enter the Eurozone on February 1 2008, and President Tassos Papadopoulos dismissed calls from the unions for a delay or for a devaluation of the Cyprus pound, which has easily remained inside its ERM variation band since accession in 2005.

'Definitely not, no way. If anything, the Cyprus pound could be revaluated upwards', said the President. 'All the indicators are against devaluation,' said Papadopoulos, adding that the fiscal deficit will have sunk to 1.5% of GDP in 2006. The Cyprus pound has been trading at around 1.73 euros (US$ 2.24).

In its recent budget, the government forecast GDP growth of around 3.9% in 2007, with inflation at 2.5% and the deficit continuing to fall. Public borrowing remains slightly above the Maastricht 60% criterion, but has been falling steadily, and is expected to dip below 60% in 2008.

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