Almunia to back Cyprus and Malta for eurozone

The European Commission will next week give the green light for Cyprus and Malta to join the euro from next January.

On 16 May the Commission is expected to approve a report saying that the two countries have met the criteria to qualify for membership of the eurozone.

According to the spring economic forecasts published by the Commission on Monday (7 May), the inflation rate in Malta and Cyprus for this year is expected to be 1.4% and 1.3% respectively, comfortably under the reference value of the three eurozone members with the lowest inflation rates. The level of public debt is also declining and is expected to be 61.5% of gross domestic product (GDP) in Cyprus and 66.5% in Malta this year, compared to 65.3% and 65.9% in 2006 respectively. The deficit is expected to fall below the 3% of GDP threshold in both countries this year, hitting 1.4% in Cyprus and 1.6% in Malta.

The European Central Bank will also present a report on the two countries’ readiness for joining the eurozone on 16 May. The final decision to approve Cyprus and Malta’s application will be taken by eurozone finance ministers and endorsed by EU leaders.

Economic and Monetary Affairs Commissioner Joaquín Almunia is expected next week to recommend closing the excessive deficit procedures against Malta, Greece and Germany because of the countries’ progress in reducing their deficit. According to the latest spring forecasts, Germany is expected to reduce its deficit to 0.6% of GDP this year and 0.3% in 2008. Greece’s deficit is estimated to be 2.4% this year and 2.7% in 2008.

The latest forecasts point to higher growth in the 13 eurozone economies and the EU27 this year than was predicted in autumn 2006. Growth in the EU27 is expected to be 2.9% in 2007 and 2.7% next year while the eurozone is expected to grow by 2.6% and 2.5% respectively.

Almunia urged EU governments to take advantage of the improved growth prospects to continue fiscal consolidation. Taking the example of Germany, he said that despite the country’s progress in reducing its deficit, the costs of servicing public debt would be 2.8% of GDP in 2007 and 2008.

The European Commission will next week give the green light for Cyprus and Malta to join the euro from next January.