Bullish report on CSE performance

A bullish report on the performance of the Cyprus Stock Exchange (CSE) in 2006 was given on 8 January by chairman Akis Kleanthous, who said that “serious work” had been done to rebuild the CSE following the disastrous collapse in share prices in 2000. He attributed the revival mainly to Cyprus’ strong economic growth, the opening of the CSE to foreign capital and the prospect of inclusion in the euro zone.

Mr Kleanthous said that the volume of CSE transactions had risen to €2.9 billion in 2006, from €200 million in 2004, and that the market capitalization of quoted companies had increased to about 85 per cent of national GDP. He expressed confidence that the progress would be maintained in 2007, notably on the strength of the joint trading platform with the Athens Stock Exchange launched in October 2006.

He added that a new three-year strategic plan was being drafted for the CSE and would cover the development of new products and tools in accordance with EU transparency and liberalization directives governing the operation of stock exchanges. There would also be a review of the CSE’s working relationship with the Finance Ministry with a view to making the operation of the CSE more flexible.


Euro application expected in February

The Government expects to submit Cyprus’ application to join the euro single currency in mid-February, announced Finance Minister Michalis Sarris on 26 January following the European Commission’s approval of its latest EU convergence programme and verdict that Cyprus’ fi scal position is “healthy”. The Government’s aim is that Cyprus should adopt the euro on 1 January 2008.

Mr Sarris said that he expected Cyprus’ application to be evaluated by the EC in March-April and for the EC’s recommendation to be considered by relevant committees and EU Finance Ministers in May with a view to the final decision being taken by an EU summit in mid-2007. He expressed confidence that Cyprus’ application would be received favourably.

Announcing the EC’s approval of the convergence programme, Economic and Monetary Affairs Commissioner Joaquin Almunia said on 23 January that Cyprus was “purifying” its public finances at a good rate and was on course to reduce its budget deficit virtually to zero by 2010. He also noted that Cyprus was on track to reduce its public debt ratio from 65 per cent of GDP in 2006 to 46 per cent by 2010.

Striking a cautionary note, however, Sr Almunia repeated previous EC warnings that Cyprus faced a major challenge to the longerterm sustainability of its public finances as a result of its ageing population. He stressed that further reforms were needed in the pensions and medical care spheres to ensure that fiscal targets are met.

President Papadopoulos on 11 January ruled out the possibility of a devaluation of the Cyprus pound in tandem with the switch to the euro, noting the strength of the pound against the euro since it joined the EU’s Exchange Rate Mechanism in April 2005. He also rejected the idea of postponing entry to the euro zone, stressing that existing standards of social welfare provision would not be sacrificed.