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Parliament in Nicosia approves adoption of euro March 16, 2007

Posted by grhomeboy in Business & Economy, Cyprus News.

The Cyprus Parliament yesterday voted in favor of adopting the euro as planned on January 1, 2008, despite opposition from a senior partner in the island’s ruling coalition.

The 56-seat house in Cyprus passed the legislation by 36 votes to 15 against after a three-hour debate. Five deputies were absent.

Safe passage was only assured after the right-wing opposition Democratic Rally of Cyprus Party (DISY) agreed to back the euro bill although it indicated last week that it could scupper the vote. The nominally communist AKEL could not vote down the bill with its 18 seats alone, but a “no” vote by DISY, which also has 18 deputies, would have killed it. DISY deputies voted in favor following government assurances that official policy was to enter the eurozone next year with minimal negative impact on Cypriot society.

AKEL MP Stavros Evagorou urged a delay to give a “transitional economy” more time to harmonize with Europe and allow extra funding for social programs.

Nicolas Papadopoulos, son of President Tassos Papadopoulos, said his DIKO party in the coalition wanted to “adopt the euro as soon as possible,” warning that Cyprus could lose out on foreign investments if it failed to do so.

Cyprus had to approve EU-mandated legislation in order to adopt the euro as planned as the European Central Bank deadline for the vote was yesterday.

Legislation covers the conversion process, yea-long dual pricing after the pound is locked against the euro, dual circulation for one month, and 100,000 fines for profiteers under a “naming and shaming” policy.

AKEL’s “no” vote caused an embarrassing rift among the three-party alliance of Papadopoulos. It argued it wanted to delay entry by one year because of concerns over the effect it could have on low-income groups. It fears a government austerity drive to meet euro convergence criteria will hinder social welfare programs. But Papadopoulos said his strongly pro-euro government could not pick and choose when to enter the eurozone. Employers and industrialists also warned that a no vote would be “catastrophic for the economy.”

The next step on the path toward adopting the euro is due to come in May, with the European Commission and the European central bank assessing whether Cyprus meets strict macroeconomic targets on public finance, inflation, interest rates and exchange rates.

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