ECONOMY

Cyprus sticks to the goal of joining the euro area by 2007, minister says

NICOSIA (Reuters) – EU newcomer Cyprus still wants to adopt the euro by 2007 and hopes to get its public finances in order in time to meet the target, the finance minister was quoted as saying on Monday. Cyprus has been eying January 2007 as the date for admission to the eurozone, but the target has been in some doubt as public finances deteriorated in the runup to European Union membership. Last year’s budget deficit hit 6.0 percent of gross domestic product and public debt exceeded 60 percent – both above the limits set for euro adoption. A fiscal consolidation strategy should see Cyprus getting economic indicators back into line by the end of 2005, outgoing Finance Minister Markos Kyprianou wrote in the Phileleftheros daily. «Our strategic goal after EU accession is now admission to monetary union and adoption of the euro. That is expected to be possible around 2007,» wrote Kyprianou, who has been appointed to the European Commission. «It is expected the government will meet all the (eurozone) criteria by the end of 2005 if a fiscal consolidation strategy is followed,» Kyprianou said. The Cyprus pound is pegged to the euro in a 2.25 percent fluctuation band. To join the euro it would have to move for two years to the Exchange Rate Mechanism (ERM2), in which the pound is allowed a greater degree of fluctuation. The timing of the application to join ERM2 is unclear. Central bank officials have said plans were expected to be firmed up with government officials in the coming weeks. Inflation is forecast to subside to 3.2 percent in 2004, but public debt and the budget deficit would be above limits set by the EU, Kyprianou wrote. The fiscal consolidation plan has included a clampdown on tax evasion, an increase in the retirement age of civil servants and an increase in charges for government services.