CYPRUS plans the parallel circulation of the pound and the euro for one month as part of its anticipated euro zone admission in 2008, Central Bank governor Christodoulos Christodoulou was quoted as saying yesterday.
The gameplan would give authorities enough time to introduce the euro to the public and gradually withdraw the pound from circulation, he said.
"We believe that Cyprus would be in a position to do the transition to euro even within a period of fifteen days, but, realistically, we have decided on a month," Christodoulou told Phileleftheros newspaper in an interview.
He said the recommendation would be passed on to the Cabinet.
Cyprus, a member of the European Union since 2004, hopes to join the present 12-member euro zone by January 2008.
It will join provided it has by then met a series of economic conditions, primarily bringing its budget deficit under control and displaying an incremental reduction of its public debt.
Both spiked in the run-up to EU admission, and a reining in of public spending in conjunction with fuel-induced inflation has stoked some public discontent.
Christodoulou said preparations for the euro were not to blame for the present difficulties.
"Preparation for the euro is a one-way street. Admission to the euro zone is not the cause, as many tend to believe, of some economic problems we have," he said, according to a transcript of the interview provided by the Central Bank.
In April 2005 the Cyprus pound joined ERM 2, a stabilisation mechanism and ante-room to euro adoption. The mechanism anchors the pound against the euro in a 2.25 per cent fluctuation margin against an agreed reference rate.
The Cyprus stock exchange plans to introduce euros in its transactions next year, when it has established a common trading platform with the Athens Stock Exchange.
The private sector needed more preparation for the transition, Christodoulou said. "I don't think we have made enough progress on that front yet."
Why just one month? If I remember correctly other countries needed 12 months to make this transition. Why they believe we can do it so much faster?
