Cyprus joins ERM2 as a precursor to Euro adoption

The Cyprus pound entered the Exchange Rate Mechanism (ERM2) over the first weekend in May 2005, along with Latvia and Malta.

The news was announced on Saturday in a joint statement by Central Bank Governor Christodoulos Christodoulou and Finance Minister Makis Keravnos.

''It is with great pleasure that we announce that the strategic goal to join the Exchange Rate Mechanism II has been achieved,'' the statement said.

In a written statement announcing the EU decision taken on Friday in Brussels, President Papadopoulos said that joining the ERM2 would bring ''specific and tangible benefits to the economy of Cyprus'' and would speed up implementation of the government's social policies.

The central parity rate for the Cyprus pound was fixed on Friday night at CYP 0.585274 per euro. This is equivalent to the previous parity rate of 1.7086 euros per Cyprus pound.

Within the ERM2, the pound will officially be allowed to fluctuate 15% either side of this rate. In order to qualify for the euro, the Cyprus pound must trade for at least two years within ERM without devaluing and meet the other four Maastricht criteria on the fiscal deficit, debt, inflation and interest rates.