EC Proposes Repeal Of Excessive Deficit Procedure Against Cyprus

by Lorys Charalambous, for LawAndTax-News.com, Cyprus

22 June 2006

The European Commission announced on Wednesday that it has decided to recommend that the Council abrogates the excessive deficit procedure (EDP) against Cyprus, after its deficit fell to 2.4% of GDP in 2005 and is projected to decrease further in 2006 and 2007.

Cyprus’s debt to GDP ratio also dropped to 70.25% in 2005 and is seen at 68% in 2007.

Cyprus would be the first of the six new Member States that were put into the EDP upon European Union membership to see the procedure abrogated. It would also be the first procedure to be closed since the Netherlands, in June 2005.

“The Cypriot case shows that budgetary consolidation undertaken with resolve can achieve sustainable results. I encourage Cyprus to pursue this route and achieve its objective of having finances close to balance by the end of the decade given the high risk arising from the costs of an ageing population”, announced Joaquín Almunia, European Commissioner for Economic and Monetary Affairs.

The Commission recommended to the Ecofin Council on Wednesday that the excessive deficit procedure against Cyprus be closed, in view of the sustainable correction of the deficit and of the downward path assumed by the debt.

With the abrogation of the procedure on Cyprus, there would be 11 Member States in EDP: Germany, France, Greece, Italy, Portugal, United Kingdom, Czech Republic, Hungary, Malta, Poland, and Slovakia.

Portugal, Italy and the United Kingdom were the last ones to be included in the procedure in 2005. Their deadlines for correcting the deficit range between 2005 and 2008.

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