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ADDRESS BY THE MINISTER OF FINANCE
2002-05-23 10:17:15

ADDRESS BY THE MINISTER OF FINANCE, MR T. KLERIDES, AT THE CONFERENCE OF EUROPEAN CENTRAL BANKS UNION
Wednesday, May 22, 2002
It is with great pleasure that I have accepted the invitation to address the Conference of the European Central Banks Union, hosted in Cyprus. I welcome all participants and wish you a fruitful conference and an enjoyable stay.
The role of the organized collective unions in Cyprus as well as in all modern societies is becoming more and more important.

Their active participation in decision-making procedures reflects the high level of our democracy. In addition, Trade Unions are instrumental in promoting social peace necessary to strengthen social cohesion in an accelerating changing world. Without any doubt the European Central Bank but also the National Central Banks are undergoing important changes. In this context the Central Banks trade unions can facilitate their role in an effort to participate successfully in the new environment.

At the same time, it should not be ignored that the European Central Bank per se is proceeding in important changes. This process unavoidably determines the new role the national Central Banks have to play in the near future.

The Cyprus economy is currently facing the challenge of accession to the EU. The smooth integration into the EU is the overriding objective of our economic policy. We are confident that negotiations between Cyprus and the EU will be concluded within 2002. Twenty seven chapters have already been closed and another two (Competition and Agriculture) are very near to closing.

We believe the Cyprus economy is ready for EU accession. During the last years, Cyprus has achieved remarkable growth of the order of 4% in real terms, while maintaining near full employment conditions, low inflation, a strong currency and a healthy Balance of Payments position.

Moreover, it has achieved fiscal consolidation and, at the same time, substantially expanded public social expenditure for the benefit of the middle and lower income classes. Cyprus enjoys already a relatively high per capita GDP, which accounts for 86% of the EU average. Moreover, it fulfills the Maastricht convergence criteria.

As far as the accession to the EMU is concerned, the Government of Cyprus advocates an acceleration of procedures and the adoption of the Euro for those countries which fulfill the Maastricht criteria, the soonest possible after accession. As already emphasized, Cyprus already fulfills the Maastricht criteria and, therefore, qualifies for membership to the EMU.

In the course of accession, Cyprus is gradually adopting the EMU acquis, which implies the abandonment of direct public sector financing by Central Bank. By the end of June 2002, Cyprus will terminate the financing of fiscal deficit by the Central Bank, as a step towards the envisaged harmonization with the EMU acquis. Cyprus is also planning to eliminate privileged access of the public sector to financial markets.

The independence of the Central Bank of Cyprus is also being promoted and safeguarded. A new Bill with regard to the independence of the Central Bank of Cyprus has been prepared, with a view to ensure harmonisation with the E.U. The bill is being discussed in Parliament now and it is expected to be passed next month and become effective from 1/7/2002.

Without any doubt, the role of the Central Bank is essential in preserving macroeconomic stability and promoting an efficient allocation of financial resources.

The Government of Cyprus is determined to continue and intensify its efforts for the completion of the legal and institutional adjustment for the adoption and effective implementation of the acquis communautaire.

I am optimistic concerning the ability of the Cyprus economy to cope with the challenge of intensified competition. This optimism is based on the already proven dynamism, flexibility and versatility, characteristics the Cyprus economy exhibited at critical phases in the past.

With these remarks I conclude, wishing you every success to your deliberations. -------------------------

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