Thumbs-up for changeover to euro

A thumbs-up for Cyprus’ progress towards adopting the euro single currency on 1 January 2008 was given on 30 November by EU Economic and Monetary Affairs Commissioner Joaquin Almunia, although he warned that the public finances needed to be controlled carefully. He and President Tassos Papadopoulos also expressed concern that Cypriots were not yet properly informed about the impending changeover, despite the stepping up of an official information campaign in October (see CN 10/2006).

Speaking in Nicosia, Sr Almunia noted that the autumn economic forecast of the European Commission (EC) had confirmed that Cyprus had made significant progress towards euro-zone convergence, by reducing its budget deficit to 2.3 per cent of GDP in 2005 and to a projected 1.9 per cent in 2006 and by putting public debt on a downward trajectory. The EC forecast had also recorded strong economic activity in the first half of 2006 and a projected full-year growth rate of 3.8 per cent.

He went on to point out that once a member of the euro-zone Cyprus would face “formidable challenges” in maintaining its public finances in convergence. Because “expenditure commitments have remained largely unrestrained” in a period of strong GDP growth, a future economic slowdown and a decrease in revenues would put the budgetary position at risk. In particular, the projected costs of an ageing population put Cyprus in “the high-risk category”.

Sr Almunia said that a decision on Cyprus’ application to join the euro would be taken by EU Finance Ministers in May or June 2007 on the basis of a further EC report, followed by formal endorsement by the European Council. Whilst stressing that he could not anticipate these decisions, he said that “things are going in a good direction”.

On practical preparations for the euro, Sr Almunia described the national changeover plan adopted in July as “a good foundation” but maintained that Cyprus still needed to put in place a comprehensive strategy to reassure the public over possible price increases during the changeover to the euro. Also required, he said, was fuller information on the return of old currency to the Central Bank and the period of dual price display.

In his address, President Papadopoulos pledged that the euro information campaign would be intensified as “a top priority”. He acknowledged that there was a mistaken impression that the euro would push up prices, but was confident that fear of profiteering could be assuaged. He also stressed that “we will not sacrifice the social state in order to achieve accession to the euro”.


First licences for oil exploration

Cyprus’ first licensing round for offshore exploration for oil and gas was launched in London on 20 November, on the basis of positive results from scientific investigations into whether the continental shelf south of the island contains hydrocarbon reserves (see CN 05/2006). Bidding is scheduled for 15 February-16 July 2007, for 12 blocks covering an area of 70,000 sq km.

Over 50 oil companies were represented at the London presentation, which Solon Kassinis, the Energy Director of the Commerce, Industry and Tourism Ministry, described as “very successful”. Mr Kassinis said that the legal framework was now in place for inviting oil companies to bid for exploration licences.


Website to assist investors in Cyprus

The Foreign Investors Service Centre (FISC) of the Cyprus Government has launched an English-language website called “Invest in Cyprus” to provide interested companies and individuals with up-to-date and user-friendly information on the investment climate in Cyprus. Available through the website is a regular electronic newsletter giving the latest information on investment opportunities and procedures in Cyprus.

The FISC operates under the auspices of the Ministry of Commerce, Industry and Tourism, whose Minister, Antonis Michaelides, said at the launch that Cyprus offers “a unique basket of competitive advantages” and provides “an ideal environment for foreign companies to grow and expand their activities”. Mr Michaelides added that “strategic geographical location, favourable business climate as well as the advantageous tax policy and high educational level of the labour force make Cyprus the ultimate business bridge for the EU and the Middle East region”.