A lot of hard work is needed if Cyprus will be able to adopt the euro as its currency without major negative repercussions on the economy, said Finance Minister Makis Keravnos, adding that Cyprus and Malta would draw on the experience of Ireland in adopting the euro.
Keravnos said Cyprus and Malta had asked for expert help and advise from Ireland as both countries start making preparations for euro adoption, while extensive help would also be forthcoming from Greece.
Speaking after a meeting of the National Advisory Committee for the Adoption of the Euro, which met for the first time last week, Keravnos said that the Cyprus pound will remain for at least two years in the Exchange Rate Mechanism II (ERM2) before adopting the euro, either in late 2007 or early 2008.
“From there and after it is not so important if it is the first of 2007 or the first of 2008. What is important is that we are prepared in time so that we can adopt the euro without any negative repercussions.”
He warned, however, that the path to adoption of the euro would not be easy and that hard work would be needed to bring the fiscal deficit to 2.9% for 2005 to bring it within the Maastricht 3% ceiling from 4.8% in 2004.
“More importantly, we need to prove that our budget reduction plan is feasible and sustainable beyond 2005,” said Keravnos.
He said the action plan on euro-entry envisaged first stabilising the economy to put in on a sound base. The next step would be technical preparation for the adoption of the euro, the adaptation of accountancy systems in the public and private sectors, and the creation of an institutional framework for the currency.
The Minister said the government has in front of it details of all the difficulties which had been faced by other countries that had adopted the euro. Cyprus would be able to learn from past mistakes, he said, which would ensure that the currency changeover ran more smoothly.
“The difficulties faced by other countries were discussed at the meeting and the Ministry of Finance has already contracted agreements with countries in order to study their experiences, and the Central Bank has done the same,” said Keravnos, adding that co-operation with Brussels would also be very close to ensure a minimum of repercussions.
Asked about the probability of profiteering during the changeover, Keravnos said that in a free market economy prices could not be fixed, but added the government would ensure the proper infrastructure was in place to keep an eye on such developments.
