10/12/2005
www.financialmirror.com
The euro "waiting room" is filling up with the latest applicant for the common European currency being Slovakia, which joined the exchange rate mechanism (ERM II) last month. Should the exchange rate for the Slovakian koruna deviate strongly, the issuing national bank in Bratislava will be forced to intervene.
Candidate countries must remain in ERM II for at least two years. Slovakia is the seventh of a total of 10 EU applicant countries, including Cyprus, which are headed for euro entry.
At first sight, it seems like a friction-free transition. Yet the eastward expansion of the eurozone from the previous total of 12 states and over 300 million people is causing a loud grinding of gears.
The largest accession country, Poland, is causing the most problems. After a change of government, the new conservative Prime Minister has indicated his readiness for a referendum on the euro in 2009. "It's a good idea to deepen direct democracy," his credo says.
Nothing has been decided yet. Joaquin Almunia, the Spanish E.U. currency commissioner in Brussels, is a strict opponent of euro referenda, saying that Poland is obliged to introduce the euro if it fulfils the entry conditions and he insists on the accession treaties.
Regardless of the referendum, one thing is clear: Poland is in no hurry about the euro; according to observers, it will scarcely be ready before 2012.
One further problem is posed by Hungary. Budapest is in the Brussels deficit doghouse because of its new deficit level of over 6% of gross domestic product. Since there are no sanctions against non-eurozone members, other means of coercion are being thought out, such as cutting off E.U. subsidies to Budapest.
Almunia has so far refrained from suggesting blocking the funds, amounting to billions. Despite the storm, Hungary maintains its intention to provide the euro currency for its citizens in 2010. Experts, however, have serious doubts that this schedule can be met.
Most of the new E.U. countries still have major difficulties in meeting the Maastricht convergence criteria on debt, inflation and long-term interest rates. Even the model pupils in the Baltic region, such as Estonia and Latvia, have excessive inflation rates with an early euro entry date for them seen as unrealistic. Next year in March, the E.U. Commission plans to present its report, after which the E.U. and the European Central Bank hope to make their decision.
Almunia has already criticised the inadequate preparations for the currency conversion, and Brussels is also concerned about ebbing public support for the euro.
This is where Cyprus should enter by showing that it is a model candidate for the euro adoption, a process that should continue smoothly up to January 1, 2008.
With the Central Bank of Cyprus already implementing its own “master plan” for the adoption of the euro, through various phases of introduction and negotiations with consumer and commercial groups to avoid any profiteering, it would be silly, even immature, for any interest group or political party to call for a further delay.
With so much going against us at the moment, the smooth adoption of the euro will instil a new air of confidence among the Cypriot consumers, workers and employers, who desperately need to come out of a stagnant political situation.
This newspaper has been in support of the euro from Day One and pledges to keep up the support for its introduction.
What are the benefits and disadvantages of adopting the Euro?
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Sometimes we still call the 5c coin as "selini" 
