Cyprus Economy Healthy

The European Commission is satisfied with the fiscal policy of the Cypriot government, which it describes as healthy and at he same time reiterates its recommendation for further reforms in the sectors of pensions and medical care, in order to tackle the consequences from the aging population.

Commissioner for Economic and Monetary Affairs Joaquin Almunia announced on Tuesday the adoption of Cyprus` convergence programme, noting that Cyprus is purifying its public finances at a good rate and is expected to reduce its national debt below 60% of GDP (Gross Domestic Product), but needs to make a better effort in reforming the pension and medical care system.

Asked about Cyprus` aim to join he Economic and Monetary Union on 1 January 2008, Almunia said Cyprus must submit the official application to enter the Eurozone by the end of March 2007, which will allow the Commission by May to draft a report with its proposal to the Council, which will have to issue a decision by June.

The Commission points out that he collective government deficit and the gross debt are projected to drop to 0.1% and 46.1% of GDP respectively by 2010, from 1.9% and 64.7% respectively in 2006.

It also notes that in general fiscal policies are aligned with he demands of the stability and development pact. The gross debt of the collective government is expected to come close to 60% of GDP by 2007 and continue to drop over the next years. However, he public cost from the aging of the population is expected to be so great that Cyprus is facing a high risk regarding the long-term sustainability of public finances.

For this reason, the Commission calls on the Council of Ministers to recommend to Cyprus he examination of expenditure regarding public pensions, and implement further reforms in the pension and medical care sectors, in order to improve the long-term sustainability of heir public finances.