EU summit approves euro entry

President Tassos Papadopoulos described the decision by the European Council meeting in Brussels on 21-22 June to approve the admission of Cyprus to the euro-zone on 1 January 2008 as a “great milestone”. The Government’s formal application to adopt the euro had been submitted in February and had subsequently passed all the scrutiny stages by EU bodies with flying colours.

Speaking on his return, the President described the summit’s decision as Cyprus’ greatest success since it joined the EU on 1 May 2004 and as an historic opportunity for the country. Its significance was great, he added, because it confirmed that Cyprus’ efforts to reach the economic levels which would justify membership of the euro-zone had been completed successfully.

At a press conference given in Brussels on 21 July after Cyprus’ application had been approved, President Papadopoulos expressed regret that because of prevailing political conditions it was impossible for the euro to be introduced in the Turkish occupied area, so that the Turkish Cypriots who live there could enjoy its advantages. The European Commission had in May confirmed its opposition to any unilateral move by the occupation regime to introduce the euro.

The key stage in the scrutiny of Cyprus’ application had been passed on 7 June when the EU Council of Economy and Finance Ministers (ECOFIN) gave it the green light, together with the application of Malta. Also important was the European Parliament’s overwhelming approval on 20 June – by 585 votes to 14 - of a report endorsing the application. Pursuant to the summit’s decision, ECOFIN will on 10 July formally ratify Cyprus’ admission to what will become the 15 member euro-zone and fi x the parity of the Cyprus pound against the euro that will apply from 1 January 2008.

As the summit deliberated, the House of Representatives on 21 June unanimously approved amendments to the legislation adopted in March establishing the legal basis for the switch to the euro. They included the addition of three trade union representatives to the seven-member Euro Observatory Commission that will monitor the effects of the new currency on prices. Another amendment specified that dual pricing must be shown on products from September 2007 until September 2008.

President Papadopoulos welcomed the summit’s agreement on a new treaty reforming structures and procedures in the enlarged EU, saying that it would enable EU institutions and national parliaments to function harmoniously. Cyprus had been one of the member-states in support of retaining as much as possible of the previous constitutional treaty rejected by French and Dutch voters in mid-2005.


Interest rates up

A quarter-point increase in two interest rates was announced by the Monetary Policy Committee of the Central Bank of Cyprus (CBC) on 6 June, lifting the Lombard marginal lending facility to 5 per cent and the overnight deposit rate to 3 per cent. However, the CBC’s key rate for refinancing operations (the repo rate), governing current market rates for deposits and loans, was left at 4.5 per cent.

A CBC statement said that the decision “was driven solely by technical reasons” in order to remain in line with the rates of the European Central Bank, which had raised its benchmark rate to 4 per cent earlier on 6 June. The aim, said the CBC, was to move gradually to a one percentage point gap between the refinancing rate and the other two rates, as required by the rules of the euro-zone.


Bank privatization

The Cyprus Development Bank (CDB) announced on 14 June that it had initiated
the process of finding a buyer, following a decision by the Council of Ministers to dispose of the Government’s 88 per cent stake. The remaining 12 per cent is held by the European Development Bank, which has also decided to dispose of its stake.

The CDB was founded in 1963 to promote growth in a then developing economy by channelling investment into the manufacturing and industrial sectors. Its effective privatization 44 years later reflects the requirements of Cyprus’ accession to the EU and acceptance of EU proscriptions on state aid.

CDB chief executive Takis Taoushanis said that “with a new ownership structure, which will provide the appropriate know-how and funding, the Bank will be in a position to expand and move into new areas of banking”. He added: “This will ensure its longterm success and enhance its contribution to the further development of the Cyprus economy.”


Launching of One-Stop Shop

Within the framework of the decision taken by the Heads of the Members States and the commitment of Cyprus to adopt specific measures in order to considerably reduce the average time for setting up a business, especially an SME, the Ministry of Commerce, Industry and Tourism announces as from 2 April 2007 the operation of the One – Stop Shop Service for setting up a business.

Consequently, from now on investors and businessmen will only need to be in contact with one single point to obtain almost all the required permits in one streamlined coordinated process rather than having to go through different government services. Therefore, reducing considerably the average time for setting up a business; aiming to one week.

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One-Stop Shop
Ministry of Commerce, Industry and Tourism
13-15 Andreas Araouzos Street
1421 Nicosia, Cyprus
Tel.: +357 22 409328 / 433
Fax: +357 22 409432
E-mail: onestopshop@mcit.gov.cy