THE European Commission yesterday recommended that the Council abrogate the Excessive Deficit Procedure (EDP) against Cyprus, after the island’s deficit fell to 2.4 per cent of GDP in 2005 and is projected to decrease further in 2006 and 2007.
The Commission also said that Cyprus’ debt to GDP ratio also dropped to 70.25 per cent in 2005 and is forecast to drop to 68 per cent in 2007.
“Cyprus would be the first of the six new Member States that were put into the EDP upon European Union membership to see the procedure abrogated,” a statement from the Commission said.
“It would also be the first procedure to be closed since the Netherlands, in June 2005. In total, there remain 11 countries in excessive deficit procedure, five of which are in the euro area.”
Cyprus is racing towards euro entry in January 1, 2008 but must first meet the Maastricht criteria to bring the fiscal deficit under the 3.0 per cent ceiling. To reach the set target, the government has implemented a strict budgetary regime in line with the convergence programme it has submitted to the EU.
“The Cypriot case shows that budgetary consolidation undertaken with resolve can achieve sustainable results. I encourage Cyprus to pursue this route and achieve its objective of having finances close to balance by the end of the decade given the high risk arising from the costs of an ageing population,” said Joaqu?n Almunia, European Commissioner for Economic and Monetary Affairs.
According to the Commission’s spring forecasts, the deficit and the debt are expected to fall further in 2006 and 2007, thus staying well below the 3.0 per cent reference value and allowing the debt ratio to diminish sufficiently towards the 60 per cent of GDP reference value.
“That points to a durable correction of the excessive deficit, thanks to the substantial and largely structural measures taken by the Cypriot authorities,” the Commission statement said. “Therefore, the Council is invited to conclude on July 11 that Cyprus no longer has an excessive deficit.”
Cyprus had a deficit of 6.25 per cent in 2003. The Council recommended a correction below 3 per cent by 2005 in a credible and sustainable manner, while ensuring that the rise in the debt ratio was brought to a halt in 2004 and reversed thereafter.
“This has been achieved,” said the Commission.
Source: Cyprus Mail
