* Cyprus Applies To Join The EurozoneCyprus Finance Minister Michael Sarris announced last week that the country has formally applied to join the eurozone after spending nearly two years in ERM2 during which the Cyprus pound has traded around a central reference rate of 1.7086 euros.
The government sent its application letter to European Central Bank President Jean-Claude Trichet and European Monetary Affairs Commissioner Joaquin Almunia. A decision on the application is expected to be made at an Ecofin meeting in Brussels in June, which would then be ratified by the EU Heads of Government; the Cyprus pound will then be locked permanently to the euro in July.
Earlier in the month, the Cypriot Council of Ministers decided that Cyprus will enter the Eurozone on February 1 2008, and President Tassos Papadopoulos dismissed calls from the unions for a delay or for a devaluation of the Cyprus pound, which has easily remained inside its ERM variation band since accession in 2005.
'Definitely not, no way. If anything, the Cyprus pound could be revaluated upwards', said the President. 'All the indicators are against devaluation,' said Papadopoulos, adding that the fiscal deficit will have sunk to 1.5% of GDP in 2006.
In its recent budget, the government forecast GDP growth of around 3.9% in 2007, with inflation at 2.5% and the deficit continuing to fall. Public borrowing remains slightly above the Maastricht 60% criterion, but has been falling steadily, and is expected to dip below 60% in 2008.