Cyprus cannot delay eurozone entry, says the governor of its central bank

NICOSIA (Reuters) – Cyprus’s central bank governor said yesterday that the island nation could not afford to delay its eurozone admission target beyond 2008, as advocated by a senior partner in Cyprus’s center-left coalition government. «Our admission to the eurozone is not only a one-way street, but it is one we cannot postpone,» Christodoulos Christodoulou said. Speaking at a news conference, Christodoulou also said he was worried whether Cyprus could sustain a recent improvement in its public finances and said reforms were required. «Their spectacular improvement in the past two years is, in part, the result of circumstantial factors and short-lived favorable conditions,» he said. Cyprus launched an 18-month media blitz on May 31 targeting January 1, 2008 as its euro admission date, but it was tempered by a call on the same day by AKEL, the leftist senior partner in the ruling coalition, to consider a delay to 2009. AKEL, which lost ground in recent parliamentary elections, has played on public concerns over inflationary pressures from adoption of the euro. The targeted changeover would coincide with a scheduled VAT increase on certain items. The party has also said that a delay would enable the government to be more «generous» in its social spending and better prepare the public for the change. «Adoption of such an option would lead to a deterioration of public finances, widening expenses without increasing revenue,» said Christodoulou. Cyprus is engaged in a stringent drive to keep its budget deficits below the 3 percent of GDP threshold, one of several economic conditions required by the European Union for eurozone applicants. It forecasts a deficit of 1.9 percent of GDP in 2006, narrowing it down to 1.2 percent in 2008.

Subscribe to our Newsletters

Enter your information below to receive our weekly newsletters with the latest insights, opinion pieces and current events straight to your inbox.

By signing up you are agreeing to our Terms of Service and Privacy Policy.