Cyprus hopes to reduce budget deficit and join eurozone by 2008

NICOSIA (Reuters) – Cyprus has yet to set a date for entering ERM-2, the anteroom for joining the eurozone, but envisages adopting the common currency by 2008, Finance Minister Makis Keravnos said yesterday. Keravnos said he had discussed the ERM-2 issue at a meeting of European Union finance ministers last weekend. «A specific (entry) date has not been defined. We want to be sure that when we do make our move, we will have positive results,» he told Cyprus public radio. Asked if he considered swift admission to the eurozone feasible, Keravnos said: «It can be achieved. It is not easy, but it can be done… It is not important if we get in at the end of 2007 or beginning of 2008. The important issue is to get in.» Cyprus had hoped to join the eurozone in 2007 but delays to the ERM-2 application and fiscal slippage have made that target uncertain. «The government targets remain. I think it is important to accede to (the mechanism). The benefits to the economy will be significant,» Keravnos said. Once a frontrunner for speedy euro adoption, public finances have deteriorated in recent years, with present budget deficit and public debt levels exceeding European Union rules. Cyprus forecasts it will cut its budget deficit to 2.9 percent of gross domestic product by the end of 2005 – just below the EU ceiling of 3 percent – if authorities adopt cost savings outlined in the convergence package. Without it, the deficit could spike to 5.8 percent, authorities have warned. The State expects a shortfall of 5.2 percent for 2004, aided in part by lower defense spending.

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