NICOSIA (Reuters) – Cyprus’s preparations to join the eurozone and its ERM-2 exchange rate mechanism is an «ongoing process» between the Finance Ministry and the central bank, finance officials said yesterday. «A procedure has started in consultation with the central bank on what steps need to be taken,» Finance Minister Makis Keravnos told reporters after a cabinet meeting. «There are many procedural issues which need to be addressed… our targets remain and it’s an ongoing process,» he later told Reuters. Cyprus hopes to join the eurozone in 2007 and has to link the Cyprus pound into the ERM-2 mechanism for at least two years before then. The island state joined the European Union last May but exceeds Brussels’s guidelines on budget deficit and public debt levels. Cyprus has a forecast budgetary shortfall of 5.2 percent of GDP this year and a public debt exceeding 70 percent. Authorities hope to compress the 2005 shortfall to 2.9 percent of GDP through a combination of cost-cutting and boosting revenue. Preparations for EU membership had caused a strain on public coffers, with the budget deficit spiking to 6.4 percent of GDP in 2003. «We do acknowledge that for us to join ERM-2 and the eurozone, there should be an improvement in public finances and [we need to] show our EU partners we are adopting the convergence plan. Our fiscal situation has improved and preparing for ERM-2 confirms this,» a Finance Ministry official said.