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Should the introduction of Euro be postponed?

Benefits and problems from the EU membership.

Should the introduction of Euro be postponed?

Postby Sotos » Fri Jun 02, 2006 12:07 am

LEFT-wing coalition partner AKEL yesterday launched a new attack on the introduction of the euro, as the government officially inaugurated its campaign to get read for eurozone entry on January 1, 2008.

AKEL wants euro entry postponed until 2009, saying it will affect the public, which is not ready for the changeover.

Party spokesman Andros Kyprianou told a news conference in Nicosia that AKEL’s demand for postponement had nothing to do with “euroscepticism”, as some liked to portray it, but was down to concern for the man in the street.

“The large budget deficit and the appalling economic situation left behind by the previous government has forced the current government to follow a strict fiscal policy,” he said.

“At the same time there were repercussions on the economy from entry to the EU, while the US aggression on Iraq has led to oil price increases, which have brought even more negative repercussions.”

Kyprianou said the workers had already been asked to make sacrifices and now that the economy was beginning to improve, the public should be compensated for the sacrifices they had made through more social measures.

“A period of postponement would be useful in further raising the standard of living. We will not accept integration into the eurozone if it means the shrinking of social benefits or privatisation of state services,” Kyprianou said.

“A postponement would help stabilise and consolidate the economy.”
The introduction of the euro would require a lot of preparation and organisation, with changes to institutional and legislative frameworks, computerisation and a complete turnaround for those dealing in goods and services.

“Particularly important will be the measures for the protection of the consumer from profiteers,” said Kyprianou. He also said there was an expected increase in VAT in foodstuffs from 0 per cent to 5 per cent, due on the same date as the island’s euro entry.

“The introduction of the euro with the simultaneous increase in VAT will lead to speculation and profiteering,” said Kyprianou.

In response to the AKEL comments, President Tassos Papadopoulos said there was a difference of opinion with the party, but that he had not discussed it with them.

Asked if AKEL’s stance would affect the smooth introduction of the euro, Papadopoulos said: ‘We believe that with the growth of the economy we might be able to achieve the two objectives of integration and an increase in social benefits.”
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Postby Sotos » Sat Jun 03, 2006 12:21 am

Nicosia. Republic of Cyprus is threatened from being left out of the Eurozone, Cypriot newspaper Simerini reads today.
The reason for this is the rising inflation. The data show that in May it reached over 3% - around 3,13%. Thus, the newspaper notes, there is danger Nicosia to follow the example of Lithuania where the introduction of the Euro was put off because the inflation did not fit the criteria.
Cyprus is planning to join EU’s Economic and Monetary Union in January 2008.


I think AKEL found the way ;)
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Postby Piratis » Mon Jun 05, 2006 1:03 am

I would expect our "great" politicians to explain the pros and cons of adopting the EURO and whether this should happen as soon as possible or if it would be better to wait.

Are there any articles that explain this things in detail?
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Postby Sotos » Tue Jun 06, 2006 12:54 am

I think everybody wants Euro just because they think is "cool" and it will make us more Europeans but nobody knows the pros and cons :roll:
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Postby Sotos » Tue Jun 06, 2006 12:57 am

I found some pros and cons in BBC for the UK. Maybe some of them apply to Cyprus.

Advantages:

1. A single currency should end currency instability in the participating countries (by irrevocably fixing exchange rates) and reduce it outside them. Because the Euro would have the enhanced credibility of being used in a large currency zone, it would be more stable against speculation than individual currencies are now. An end to internal currency instability and a reduction of external currency instability would enable exporters to project future markets with greater certainty. This will unleash a greater potential for growth.

2. Consumers would not have to change money when travelling and would encounter less red tape when transferring large sums of money across borders. It was estimated that a traveller visiting all twelve member states of the (then) EC would lose 40% of the value of his money in transaction charges alone. Once in a lifetime a family might make one large purchase or transaction across a European border such as buying a holiday home or a piece of furniture. A single currency would help that transaction pass smoothly.

3. Likewise, businesses would no longer have to pay hedging costs which they do today in order to insure themselves against the threat of currency fluctuations. Businesses, involved in commercial transactions in different member states, would no longer have to face administrative costs of accounting for the changes of currencies, plus the time involved. It is estimated that the currency cost of exports to small companies is 10 times the cost to the multi-nationals, who offset sales against purchases and can command the best rates.

4. A single currency should result in lower interest rates as all European countries would be locking into German monetary credibility. The stability pact (the main points of which were agreed at the Dublin summit of European heads of state or government in December 1996) will force EU countries into a system of fiscal responsibility which will enhance the Euro's international credibility. This should lead to more investment, more jobs and lower mortgages.

Disadvantages:

1. Fifteen separate countries with widely differing economic performances and different languages have never before attempted to form a monetary union. It works in the United States because the labour market is mobile, helped by the common language and portability of pensions etc. across a large geographical area. Language in Europe is a huge barrier to labour force mobility. This may lead to pockets of deeply depressed areas in which people cannot find work and areas where the economy flourishes and wages increase. While the cohesion funds attempt to address this, there are still great differences across the EU in economic performance.

2. If governments were obliged through a stability pact to keep to the Maastricht criteria for perpetuity, no matter what their individual economic circumstances dictate, some countries may find that they are unable to combat recession by loosening their fiscal stance. They would be unable to devalue to boost exports, to borrow more to boost job creation or cut taxes when they see fit because of the public deficit criterion. In the United States, Texas could not avoid a recession in the wake of the 1986 oil price fall, whereas demand for Sterling changed in the light of the new oil price, adjusting the exchange rate downwards.

3. All the EU countries have different cycles or are at different stages in their cycles. The UK is growing reasonably well, Germany is having problems. This is the reverse of the position in 1990. Since the war the UK economy has tended to have an economic cycle closer to the US than the EU. It has changed because interest rates are set in each country at the appropriate level for it. One central bank cannot set inflation at the appropriate level for each member state.

4. Loss of national sovereignty is the most often mentioned disadvantage of monetary union. The transfer of money and fiscal competencies from national to community level, would mean economically strong and stable countries would have to co-operate in the field of economic policy with other, weaker, countries, which are more tolerant to higher inflation.

5. The one off cost of introducing the single currency will be significant. The British Retailing Consortium estimates that British retailers will have to pay between £1.7 billion and £3.5 billion to make the changes necessary. Such changes include educating customers, changing labels, training staff, changing computer software and adjusting tills.
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Postby Piratis » Fri Jun 09, 2006 1:09 am

Thanks Soto.

I believe that Cyprus can not avoid the EURO, not only because of economic but due to political reasons as well. However I don't think we should rush and do this move before we are ready to do it correctly.
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Postby raymanuva » Fri Jun 09, 2006 1:18 am

the biggest disadvantage will be is that in Cyprus they will be rounding up prices...
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Postby Sotos » Fri Jun 09, 2006 11:47 am

raymanuva wrote:the biggest disadvantage will be is that in Cyprus they will be rounding up prices...


Thats for sure! But this will be only a short term disadvantage I think. We should look for the long run effects. Will they be positive or negative?
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Postby fsturbo15 » Sat Jul 22, 2006 8:06 am

Never rush anything
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Postby Biker » Sat Jul 22, 2006 8:20 am

Sotos wrote:I think everybody wants Euro just because they think is "cool" and it will make us more Europeans but nobody knows the pros and cons :roll:


Over the past couple of years I've spoken to ordinary people from: Spain, Italy, Ireland, Belgium, Germany, Holland, France and Greece, without exeption NONE of them want the Euro, ALL of them wish they could turn the clock back and not be in the Eurozone and without any exeption they say the introduction of the Euro caused a huge cost of living increase.

Out of interest why don't our Cypriot politicians give us the right to vote on whether we get it or not?:roll:

....Oh I forgot, they didn't think we should vote on if we joined the EU or if we should adopt the EU constitution, so why change the rules now! :roll:

Is Cyprus the most undemocratic country in the EU? :shock:
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